Apportion personal expenses for business on/for Form 11

[officepres]

I am a sole trader and I'm putting in my Form 11 for 2016 using ROS. I use wave accounting which generates any reports I need, P&L, balance Sheet, etc. It's a bit like Sage Accounting in that I input all my expenses, etc.

I was advised that since I run my business from home and use my personal car for business etc, that I can apportion heat, light and motor expenses. I pay these through the business with the intention of apportioning them at the EOY when I submit my Form 11 ( so if I spend 5000 on motor expenses during the year, I'd only put in the percentage used by the business, same with the other relevant items ).

The problem is that my accounting software has no built in solution for apportioning, so if I look at my P&L for instance, and at the motor expenses, it shows ALL of the motor expenses, not just the business portion.

My problem is if I do the apportioning ( say just using a calculator for instance ) and write down the adjusted figures and enter those apportioned figures into the form 11, then the problem is they will not match my P&L ( which would include the personal portion). If there was there a way to add the non apportioned figures into the form 11 ( so that the form worked the apportioning out ); then that would be great of course, but I expect not. The other solution I guess would be to develop a new (adjusted) P&L which was derived from the software's output, but with the apportionment done — but I am concerned in case this ends up looking manipulated because I think I've heard that it doesn't look good if you tamper with the output of the software, is that the case? Maybe that's what people have to do though?

I was wondering actually how sage accounting or the other software packages handle this - I did use Sage in the past for a few years. It was a long time ago, but I don't remember it having any facility for handling this.

Any suggestions or observations appreciated.

 

[T McGibney]

The conventional treatment is to account for your expenses in your accounting system and then separately add back the personal element of expenses incurred to arrive at your tax-assessable income.

 

[cremeegg]

As T McGibney says and there is a box for that on the Form 11.

A more important issue that may arise in working from home, is does it then become a business premises, are you liable for rates and is the CGT exemption affected.

 

[officepres]

The conventional treatment is to account for your expenses in your accounting system and then separately add back the personal element of expenses incurred to arrive at your tax-assessable income.

thanks - is that this section (below) then - how does it work - do you mean I would add both the business and personal side and then in this section I would put in the personal side and it would have the effect of reducing my business expenses - is that how it works? Sorry I'm just confused becuase it's called "Add back" even though it's effectively a reduction ( in the expenses ) - I'm also confused because there's so few sections on it - the only odd one out for me would be broadband that I can see but I suppose that would be counted as phone.

[From Form 11]
Adjustments made to Profit/Loss per Accounts

• Motor Expenses
• Donations (Political and Charitable)/Entertainment
• Light, Heat and Phone
• Net gain on sale of fixed / chargeable assets
• Net loss on sale of fixed / chargeable assets
• Stock relief claimed under S 666
• Stock relief claimed under S 667B

 

[officepres]

As T McGibney says and there is a box for that on the Form 11.

A more important issue that may arise in working from home, is does it then become a business premises, are you liable for rates and is the CGT exemption affected.

I'm surprised to hear any issue with this. I've been working from home for 10 years now and I'm pretty sure I would have left no stone upturned to make sure there was no issue with me working from home when I started. I definitely consulted 2 separate accountants about it I know that for a fact, and actually a lot of my clients work from home and I never heard of either of these being issues ... do you have any reason to suspect these ... and/or are they new rules. All I could find on revenue.ie about it was regarding employees working from home. I never heard of any restriction or impact on self employed people using their home as their place of business. Surely this would be a crazy area for the government to mess with ... I mean farmers, B&B's, Public houses, restaurants, hairdressers, artists, painters and decorators, little old ladies baking apple tarts for the farmers markets ... surely I would have heard something about it?

 

[Gordon Gekko]

Apportioning domestic expenses isn't an issue at all in terms of PPR relief on your home etc; the key is that the area isn't used exclusively for business.

 

[officepres]

Apportioning domestic expenses isn't an issue at all in terms of PPR relief on your home etc; the key is that the area isn't used exclusively for business.

thanks

 

[cremeegg]

I'm surprised to hear any issue with this. I've been working from home for 10 years now and I'm pretty sure I would have left no stone upturned to make sure there was no issue with me working from home when I started. I definitely consulted 2 separate accountants about it I know that for a fact, and actually a lot of my clients work from home and I never heard of either of these being issues ... do you have any reason to suspect these ... and/or are they new rules. All I could find on revenue.ie about it was regarding employees working from home. I never heard of any restriction or impact on self employed people using their home as their place of business. Surely this would be a crazy area for the government to mess with ... I mean farmers, B&B's, Public houses, restaurants, hairdressers, artists, painters and decorators, little old ladies baking apple tarts for the farmers markets ... surely I would have heard something about it?

Apportioning domestic expenses isn't an issue at all in terms of PPR relief on your home etc; the key is that the area isn't used exclusively for business.

While I think both the above are wrong I decided not to respond until I had something more definite than my own general knowledge to contribute.

My initial comment was based on the experience of a friend who has had to pay rates on a portion of the value of his private house because he runs a business from home.

In addition I have found the below.



http://www.askaboutmoney.com/threads/home-offices-planning-permission-and-commercial-rates.127785/

While I don't think either source answers the question authoritatively, both support the idea that a home worker, who does not have an other place of business is liable for rates. As to the loss of CGT exemption on the sale of the property I think that goes together with the rates question.

 

[Gordon Gekko]

Is it not fraught with danger to post something so definitive and so dismissive of what others are saying when your own knowledge base is limited to the above?

[broken link removed]

Note the reference to "exclusive use".

As I posted, non exclusive use for business purposes does not contaminate PPR relief.

 

[cremeegg]

!

 

[Gordon Gekko]

How can you suggest that I was definitive

"While I think both the above are wrong I decided not to respond until I had something more definite than my own general knowledge to contribute."

But you have nothing definitive and are completely wrong!

 

[cremeegg]

It is prudent rather than dangerous to suggest that people check out the possible tax implications of their decisions.


I don't why you say I was being "so definitive"

I would have liked to be definitive, I tried to find evidence to support a definitive position

I decided not to respond until I had something more definite than my own general knowledge to contribute.

but I was unable to and I clearly admitted this.

While I don't think either source answers the question authoritatively, both support the idea that a home worker, who does not have an other place of business is liable for rates. As to the loss of CGT exemption on the sale of the property I think that goes together with the rates question.

I have read your link to the website of a firm of accountants and this seems to be the relevant quote

"Where part of a property has been used exclusively for business purposes the relief under S. 604 will have to be apportioned between the business and residential part of the property. "

This would seem to suggest if you have a room in your house (part of the property) used exclusively for business purposes (as an office) you lose part of the CGT exemption.

According to the link you yourself posted exclusive use of part of the property does indeed "contaminate" as you say, PPR relief.

Furthermore the article I have quoted from the Irish Independent suggests that the word exclusively is not correct. That even non exclusive business use of part of a property means that rates are payable in proportion to the space so used.


I previously suggested that the question of liabliity for business rates and the possibility of losing the PPR CGT exemption were linked. While the considerations maybe similar or even the same, CGT is a matter for Revenue, business rates a matter for the local authority.

 

[Gordon Gekko]

Okay, so I've posted something from a reputable tax specialist, and you're quoting the Irish Independent. And you don't see an issue with that?!

What exactly is your point? You were saying that rates and PPR Relief are linked; are you now saying that's not the case?

Do you accept that non-exclusive business use of part of one's home does not contaminate one's entitlement to PPR Relief?

 

[Sophrosyne]

Gordon,

If he does not use a dedicated space in his home for business purposes, would that affect his claim for light, heat, etc.?

 

[cremeegg]

What exactly is your point?

My point is that the OP a sole trader who runs his business from home, and many others like him, may have unexpected tax issues.

If he sets up an office in part of his home and uses that exclusively for business purposes, then he loses (pro-rata) the PPR exemption from CGT on the sale of the home.

Would you disagree ?

 

[T McGibney]

If he sets up an office in part of his home and uses that exclusively for business purposes, then he loses (pro-rata) the PPR exemption from CGT on the sale of the home.

Of course he would. As Gordon says the key is to ensure that there is at least some personal use of that space. It's not a particularly difficult requirement to satisfy.

This question has nothing whatsoever to do with rates assessments.

 

[cremeegg]

As Gordon says the key is to ensure that there is at least some personal use of that space. It's not a particularly difficult requirement to satisfy.

This question has nothing whatsoever to do with rates assessments.

Can you explain how the requirement with regard to exclusive use is satisfied. In my own case, the room I use as an office to run my business is also used for studying by the children. The filing space however has no other function.

As a practical matter of course, if I ever sold the house I would take the PPR exemption from CGT at 100%. However it is good to understand the correct legal position as well.

 

[T McGibney]

Can you explain how the requirement with regard to exclusive use is satisfied. In my own case, the room I use as an office to run my business is also used for studying by the children. The filing space however has no other function.

Send them off to play in the filing area too and you should be ok.

However it is good to understand the correct legal position as well.

This is an internet site, not a platform for definitive advice. I don't claim anything I say here is infallible but it should help.

 

[Setanta12]

In the past I advised clients to store their golf-clubs in the 'office' and to let the kids do their homework there. Filing space queries ... I won't dignify .. ..

 

[cremeegg]

So the consensus opinion on PPR relief from CGT seems to be if a part of the home is used exclusively for business purposes, then the relief is lost pro-rata. But that Revenue are happy to accept any old rope as evidence that the business use was not exclusive.