If there is only minor use, for example writing up the business
records at home, you may accept a reasonable estimate without
detailed enquiry.
The following examples are a guide only and intended to
demonstrate the principles to be applied. The examples are not
intended to be prescriptive; each case will be dependant on the
facts.
Angela writes up her business records at home. She uses a room
solely for business use for a short period each week. She estimates
that £104 covers the cost of the proportion of the
establishment costs, plus the electricity for heating and lighting.
Although the claim for £104 is obviously an estimate of
£2 per week, the claim is small and reflects the facts of the
case. It is a reasonable estimate of the expense incurred. No
enquiries are necessary.
Bill runs a small business. He uses one small room at home as an
office, exclusively for the purposes of his trade (CG64660). The
room represents 5% of the floor area of the house.
His Council Tax, insurance and mortgage interest bills total
£4500. He claims 5%, £225.
His electricity bill for heating & lighting is £300.
He claims £15, which is 5% of the total.
His total claim is £240 (plus the business proportion of
his phone bill).
Although Bill has apportioned his electricity bill by floor
area rather than usage, the amount claimed is small and there is
nothing to suggest that his business use is significantly greater
or lesser than his private use. It can be accepted as a reasonable
estimate.
Bert runs a small business. He uses the spare bedroom at home as
his office except for a week at Easter and a week at Christmas. All
he does is to write up his records, once a week.
The house has 10 rooms. Bert calculates that his business
expense, based on 1/10 of the total costs would be £450. Bert
recognises that this is far too much for what he actually does at
home.
Bert estimates that £104 covers the cost of the
proportion of the establishment costs, plus the electricity for
heating and lighting.
Although the claim for £104 is obviously an estimate of
£2 per week, the claim is small and reflects the facts of the
case. It is a reasonable estimate of the expense incurred. No
enquiries are necessary.
Chris is an author working from home. She uses her living room
from 8am to 12am. During the evening, from 6pm until 10pm it is
used by her family. The room used represents 10% of the area of the
house.
The fixed costs including cleaning, insurance, Council Tax
and mortgage interest, etc total £6600. A tenth of the fixed
establishment costs is £660. For the purposes of fixed costs,
one sixth (4/24) of the use by time is for business, so Chris
claims £110.
She uses electricity for heating, lighting and to power her
computer, which costs £1500 per annum. Chris considers an
apportionment of these costs by time and area. A tenth of the costs
are £150 and half of these costs by time (4/8) relate to
business use, she claims £75.
She also uses the telephone to connect to the internet for
research purposes. Her itemised telephone bill shows that a third
of the calls made are business calls. She can claim the cost of
those calls plus a third of the standing charge.
The facts are as in example 4.
Chris has some work done on the house. She has the exterior
painted and at the same time has the dining room re-decorated.
What, if anything, can she claim as a deduction?
The exterior painting is a general household cost. She can
claim a proportion based on business use.
Chris does not use her dining room for business purposes. The
cost of redecorating the dining room is not an allowable
expense.
Gordon, an architect, dedicates a room solely for use as his
office between 9am and 5pm daily. The room contains a workstation,
office furniture and storage for his drawings. He uses the room for
an average of 4 hours each day, though often this is spread over
his working 8 hour day as he has a number of regular site visits to
make. In addition it is not uncommon for Gordon to accommodate
clients in his office to discuss plans, outside of normal hours.
The room is available for domestic use outside of business
hours and his family regularly make use of the room for around 2
hours each evening.
After apportioning costs by reference to the number of rooms
in the house, Gordon calculates the room uses £300 of variable
costs (electric and oil) and £600 of fixed costs (council tax,
mortgage interest, insurance). In apportioning these costs by time
Gordon claims £680 in total, made up of 4/6 of variable costs
(£200) and 8/10 of fixed costs (£480).
The claim equates to 75% of the total costs attributable to
the room (£680/£900), which Gordon views as a more
straightforward but equally reasonable basis for future claims,
should his circumstances remain unchanged.
Bill entertains a number of customers at his home. Each time he
hires caterers and also a firm of cleaners.
Although Bill has used his home for business purposes, he
cannot claim any of the costs as there is legislation that
disallows entertaining costs – see
BIM45000 onwards.
