Use Of Home As Office
The question of expenses can be intricate. Different types of expenses have particular taxation implications. In general, expenditure that is incurred wholly and exclusively for the purposes of business is allowable for Corporation Tax. These expenses are deducted from your company’s income and have the effect of reducing taxable profits, thereby reducing the overall amount of tax payable.
Although expenditure may be incurred by the business, there may be an element of benefit to you, the company director. This will have personal taxation implications as these items are considered by the Inland Revenue to be a Benefit in Kind.
Examples of Allowable Expenditure may include the following items.
Use of home as office
A reasonable proportion of the costs of running your office from home are allowable. What is reasonable will depend upon the facts; however 20% of the costs of occupation such as rent or your mortgage interest will be allowable. It is also important that no one room in your home is devoted exclusively to company business. If you find yourself continually working in one area make sure that is has personal items around such as your exercise bike or rowing machine or other items of a personal nature. Also a reasonable amount say 20% of your utility bills, like gas and electricity usage, will be allowable. But note that standing charges for utilities and for council tax are not allowable.
The following items of expenses provide a broad guide to what expenses are allowed, in addition to the specific examples given above.
- Accountancy Fees
- Printing Postage Stationery and Advertising
- Pension Contributions and the cost of Income Protection
- Trade Magazines and Journals
- Subscriptions to Professional Bodies.
- Bank Charges and Interest
- Business Insurance, both public and employee liability, and professional indemnity insurance
The list is not exhaustive; they are all allowable expenses and should have no personal tax or national insurance implications to you as a company director.