This page looks at some of the types of expenditure that may be
allowable. It should not be seen as an exhaustive list. What is
allowable depends on the facts in each case.
Expenses broadly fall into two categories, fixed costs and
running costs.
Some costs relate to the whole house and have to be paid even if
there is no business use. These include costs such as, Council Tax,
mortgage interest, insurance, water rates, general repairs and
rent.
If part of the home is set aside solely for business use for
a specific period then a part of these costs is allowable. It will
normally be appropriate to apportion these expenses by area and
time. Some particular points are considered below.
If the business use is covered by a separate policy then the
cost of that policy is allowed in full, with no part of the
household policy being allowed.
Otherwise, an appropriate part of the premium can be
allowed.
The council tax is a tax on property. In principle it may be allowable in those instances where other property based expenses are deductible. If business use is established the appropriate proportion of the tax may be allowed under the normal rules for the deduction of expenses. More detailed guidance can be found at BIM46840.
If part of the home is used solely for business then an
appropriate part of the mortgage interest is an allowable
deduction. Repayments of capital are not allowable.
More detailed guidance on interest payments can be found at
BIM45650 onwards.
Part of the rent is an allowable expense when the home is rented
and part is used solely for business purposes.
A sole trader cannot charge a separate rent to his or her own
business. This is because individuals cannot rent property to
themselves. The allowable expense is the proportion of the rent
paid to the landlord that is properly attributable to the part of
the home being used solely for business purposes. Where a partner
charges rent for the use of their home by a partnership of which
they are a member see
BIM38110.
A proportion of the cost of general household repairs and
maintenance is allowable in line with the proportion that the house
is used solely for the business. Examples include the general
redecoration of the exterior or repairs to the roof.
Repairs that relate solely to part of the house that is not
used for the business, such as decorating a room not used for the
business, are not allowable. Equally if a room is used solely for
business purposes then the cost of redecorating that room is wholly
allowable.
For more information on what is a repair see
BIM46900 onwards.
There are some expenses where the total bill may vary with the
amount of business use. They include cleaning, heat and light and
metered water.
If the claim is small and there is only minor business use of
the home, for example the taxpayer writes up their business records
at home, you may accept a claim based on any reasonable basis.
Where there is significant business use it is appropriate to
apportion such expenses by reference to the facts of that
usage.
The facts may result in a higher proportion of costs
attributable to either business or domestic use.
For example, a cleaner may clean the living rooms but be
under strict instructions to leave the office alone. In this
situation, the payments to the cleaner are not an allowable
expense.
A proportion of the heating and lighting costs of a room used at
times solely for business purposes is allowable. The proportion
should reflect the facts of usage. Where usage is minor, such as
the occasional writing up of records, you may accept any reasonable
estimate consistent with such minor use.
You should take into account the number and nature of any
power consuming items involved. A commercial photographer working
from home using specialist studio lighting will have a much higher
business expense for electricity than a trader writing up records
once a week in the spare bedroom.
The cost of business calls is allowable. Also allow a proportion
of the line rental (based on the ratio of business use to total
use). This proportion should reflect all aspects of use, including
incoming calls, though in most cases reference to itemised outgoing
calls will provide a reasonable and acceptable measure.
Care should be taken and a flexible approach adopted when
considering the level of apportioned business expenditure, relating
to all inclusive packages offered by telephone and broadband
providers.
Expenditure on an internet connection (including broadband and wireless broadband) is allowable to the extent that the connection is used for business purposes. Where there is 'mixed' (business/non-business) use, follow the approach used for telephone rentals.
In cases of heavy usage the business part of the property may be
separately charged (and so fully allowable) in which event none of
the domestic cost is deductible.
In the case of minor business use of the premises, such as
writing up records, there is no business use of water and so none
of the water charge is allowable.
