The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Many people work from home either on an informal or a full-time basis. These people can be employed or self-employed, and their employment status affects the expenses they can claim as a deduction from their earnings.
When dealing with someone working from home, it is important to remind him that although exclusive business use of part of the house may allow him to claim tax relief for more of his household expenses, it will restrict his capital gains tax relief on the sale of the house. This is discussed further in the Principal private residence relief ― anti avoidance guidance note.
Normally, there will be no liability to business rates if the room(s) used for the business is also used domestically. If a significant proportion of the property is used exclusively, or almost exclusively, for business, then business rates may be payable. The council tax banding on the remainder of the property may also need adjustment. For more on business rates, see the GOV.UK website.
The general rule for allowing revenue expenses against self-employed earnings is that the expenses must be:
not capital in nature, and
wholly and exclusively for the purposes of the trade (the non-business proportion of the expense is disallowed)
ITTOIA 2005, ss 33, 34
The general rule is applied to the different types of expenses home workers might incur. With most home expenses, this means that the allowable deduction will be the amount of the expense which relates to the homeworking (eg 10% of the electricity bill, for example).
For more discussion on the general rule, see the Wholly and exclusively and Capital vs revenue expenditure guidance notes.
However, from 2013/14 onwards, fixed rate deductions were introduced for the self-employed in order to reduce the administrative burden, although the fixed rate deductions may be lower than the deductions available under the general rule.
Expenses under the general rule and the fixed rate deductions rule are considered below.
When considering whether travelling costs
**Free trials are only available to individuals based in the UK. We may terminate this trial at any time or decide not to give a trial, for any reason.
Access this article and thousands of others like it free for 7 days with a trial of TolleyGuidance.
Read full article
Already a subscriber? Login
This note offers guidance in respect of the administration of company tax returns. If a company or organisation is subject to corporation tax they will have to complete and file a company tax return for each accounting period. A company or organisation must, in the main, file a return even if they
This guidance note explains how to calculate the amount of tax that arises under the lifetime charge. In general terms the lifetime charge will apply to individuals who transfer property into a trust that is subject to the relevant property regime. See the Chargeable transfers and Occasions of
From 6 April 2015, an individual can elect to transfer 10% of the personal allowance (£1,250 in 2020/21 and 2019/20) to the spouse or civil partner where neither party is a higher rate or additional rate taxpayer. The legislation calls this the ‘transferable tax allowance’ but the GOV.UK website
The corporate interest restriction (CIR) essentially limits the amount of interest expense a company can deduct from its taxable profits if the interest expense is over £2 million. The actual mechanics of the CIR calculation are highly complex (the legislation is over 150 pages long) and are
To view our latest tax guidance content, sign in to Tolley Guidance or register for a free trial.