If You Trade From Home What Can You Claim Back In Expenses And Is It Worthwhile?
If you Work From Home, either as a self employed person or as an worker, then you may be looking at what tax breaks might be available to you because you are making business use of some of your personal assets in the operation of the business . An Internet Business for example might be operated from home taking up a remote room which needs heating and lighting. Also computers and any other office kit such as photocopiers or printers and fax machines are devouring your personal electricity. Most online jobs demand the same amount of operating costs when run from home so it is attractive to consider assessing all these costs, which would not have developed if you did not Work From Home, group them together as company expenses and try to claim them as allowable against tax. It is a very pratical argument that you should not have to pay such expenses out of taxed income and indeed most accountants would confer with this outlook. Your internet business, any online jobs you have, or any other work from home situations should not be subsidised out of your own wallet, especially after you have paid tax in the first place.
But be aware of how far you take this. For example you may be tempted to add to this list of expenses a portion of your council tax bill. Envisage you need an completely different room to enable you to work from home, a room dedicated to your Internet Business or Online Jobs. This room is used for nothing else so you can logically argue that if you didn’t work from home, you wouldn’t need this extra room and so your house could be smaller and your council tax bill thereby lessened. You might argue that your company ought to therefore foot the bill for a section of the council tax bill and that this should be allowable against tax on profits made from your business. You could work out the amount of council tax reclaim as the amount of the floor area of your Work From Home room to the full amount of floor area of your house. Let’s say that is equal to 10%, you could argue that 10% of your council tax bill is directly attributable to your company and therefore us a business expense allowable against profit. This might very well be agreeable but the threat lies in the future.
Assume that you had claimed as above for a number of years, regularly setting off that 10% and reducing your tax bill accordingly. Then one day you sell your house and you realise a very large profit. (If you own a house for an amount of years then you almost surely will). In the normal way of things any profit made from the appreciation of a property that has been used exclusively for residential purposes is tax free. But if the property has been portion of the profit made on the transaction is owing to your company, rather than you as an person, and therefore income tax should be paid on that percentage. The fact that you had regularly made claims for council tax would be decent evidence to support any such claim by the revenue and the net effect could be a massive and unavoidable tax liability far greater than the savings you made over the years.
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