Running a business from a bedroom: What % Of Domestic Bills Are Claimable Against Tax

eirman

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If a person is running a business from a bedroom in their primary residence, what proportion of the domestic bills can be written off against tax?

I know that this is a big "it depends" situation, but any guidance would be appreciated.

I am referring in particular to ....
Electricity
Gas / Oil
Property tax
Maintenance
Eircom phone & Broadband
House Insurance
Rent / Mortgage
Water charges
 
If a person is running a business from a bedroom in their primary residence, what proportion of the domestic bills can be written off against tax?

I know that this is a big "it depends" situation, but any guidance would be appreciated.

I am referring in particular to ....
Electricity
Gas / Oil
Property tax
Maintenance
Eircom phone & Broadband
House Insurance
Rent / Mortgage
Water charges

As you say, it depends totally on the individual circumstances in each case. I would be hesitant to claim any significant deductions for any of the above items, particularly in light of the recent Revenue kerfuffle over home office company deductions, and you might be as well off not claiming deductions for any of these items.

It's your call.
 
My other half queried this with his accountant recently and was advised not to claim it. It was something to do with if he ever sold the property that he would be liable for something but I just cannot remember what. Someone else might know what's being referred to here.
 
According to [broken link removed]
If you are working from home you may be able to claim a proportion of household bills such as telephone, heating, lighting etc.

Of course, a lot depends on how much time you spend working at home ...
It could be couple of hours a month to write up the books
or
Fifty solid hours a week.
 
I would be hesitant to claim any significant deductions for any of the above items, particularly in light of the recent Revenue kerfuffle over home office company deductions.

Do you have any more information on this?
 
According to [broken link removed]
If you are working from home you may be able to claim a proportion of household bills such as telephone, heating, lighting etc.

Of course, a lot depends on how much time you spend working at home ...
It could be couple of hours a month to write up the books
or
Fifty solid hours a week.

The bottom line from the perspective of the actual tax legislation is that the only expenses you are entitled to a deduction for are those that are "wholly and exclusively laid out or expended for the purposes of the trade or profession".

As you rightly say, how much you can claim will very much depend on the amount of the work that is carried on from the home. Consider the ESB bill - the first €32 or so relates to the standing charges which you would have incurred in any event, so arguably the amount which you can claim a deduction for is only the unit cost of the electricity used while carrying on the business activity at the house. Unless you have power hungry machinery running at the house, the bulk of your energy use will be from the old reliables like the electric shower (not used for business purposes), the white goods (not used for business purposes), kettle (not usually boiled for business purposes) etc... so the actual amount of the units used wholly and exclusively for business purposes is likely to be quite small.

You might have a better case to make in relation to heating, but again logically if you're asserting that you're only using part of the house, part of the time for your home office (which an owner occupier needs to do unless they want a CGT problem if/when they ever sell), then the proportion of the heating bill for heating a whole house, will be fairly limited.

If you have a domestic bundle for broadband, phone & TV as many people now do - if the bundle is a fixed price and you don't exceed the tariff, how can you argue any of the cost is wholly & exclusively business related? If you changed to a more expensive bundle than you had been on, then you could make an argument that the additional cost for phone & internet contained an element related to the business.

Even if you don't have a bundle, if you have say an unlimited broadband package for the house, which is a fixed cost, how can you argue the proportion of that which is wholly and exclusively business related?

Ditto a mobile phone package, how do you argue the proportion that is wholly and exclusively business related if you've got say a €40 a month tariff, including data?

The reality is that the vast bulk of all of the above expenses are personal, and having/running a small business from home (depending on the type of business) will not substantially alter the amount of a lot of these expenses - so why should you get an income tax deduction for them?

The reality in practice, and bear in mind it's generally only looked at by Revenue in the context of an audit (or in screening cases to find ones suitable for an audit), is that a reasonable level of expenses for light & heat, phone, motor etc (again by reference to the type of business in question) is unlikely to be challenged.
 
Mandelbrot is on the very conservative side.

Re package for TV/broadband/phone - the prices here are broken down. TV very hard to argue that business. However broadband and landline - pure business expense in my view and incidental business use. Who has a landline these days but only for business.

I know of one chap who works from home and has moved to business packages so VAT can be reclaimed. Business UPC, business landline and mobile. Any personal use is wholly incidental.
 
Mandelbrot is on the very conservative side.

Re package for TV/broadband/phone - the prices here are broken down. TV very hard to argue that business. However broadband and landline - pure business expense in my view and incidental business use. Who has a landline these days but only for business.

I know of one chap who works from home and has moved to business packages so VAT can be reclaimed. Business UPC, business landline and mobile. Any personal use is wholly incidental.

I was only playing devils advocate D66!
 
Thanks everyone,

I think I'll err on the side of caution on this one.

Whatever you claim make sure you can sit down and justify it with someone who does this stuff for a living eyeballing you from the other side of the table.
If you can't then don't.
 
Thanks Purple
l normally go on the assumption that I'm going to be audited.

I was just looking for some general guidance, especially from anyone who had been through an audit process.
 
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