Is working from home as financially effective as it seems?

N

nmitchell

Guest
Hi there,

I currently work from home as an independant consultant and a ltd company. I am claiming half the rent (equivalent to a small office in the locality) and a standard portion of broadband, oil and elec charges as business expenses. I am not aware of any other expenses associated with the house that I can charge to the company. The total I claim is approx. €6,800 per year.

I am considering moving to an office in town as working in close proximity to my children is proving a significant distraction. The rent for a small office is approx. €65-75(ex VAT) per week. i.e. €3,380 - €3,900 per year.

Am I correct in thinking that I would be up to €6,800 + €3,900 = €10,700 worse off per year than I am now if I took on an office or am I not considering something obvious?

Any comments would be greatly appreciated.

Thanks,

N
 
Did you take proper advice on claiming these expenses?

You can only claim cost incurred "wholly and exclusively" for business purposes. If it's not wholly incurred for business the non-business portion will be disallowed.

You can't claim the equivalent for a small office in the locality. If you rent your home you could claim a portion of the rent paid as business expense. The proportion claimed should be calculated using something tangible, such as floor area.

There is no "standard portion" of broadband, oil and electricity charges - again the allocation to business use must be based on something tangible. Contrary to popular belief, you can't pick an arbitrary percentage.
 
Hi Smeharg

In terms of the proportion of rent I am claiming, it is based on floor space for the room I am using plus office storage space downstairs plus the shed out the back. For bills, I am claiming 50% of broadband, and 15% for oil and elec charges which I dont think are unreasonable given I am here all day every day. I ran this by a fellow consultant in a similar position, who was revenue audited and similar percentages were approved.
 

Presumably, you do actually rent your home as opposed to owning it and charging rent to the company?

15% doesn't seem unreasonable, although what may be reasonable for one person's circumstances may be unreasonable for another's and Revenue will look at it on a case by case basis.

Regarding the extra cost, assuming you can extract those expenses tax free, you would obviously not be able to do that if you move to a dedicated office. You can still take the cash out but you'll pay tax on it. The cost, therefore, is the tax saving lost which will depend on the rate at which you pay tax. The other cost will be the costs of renting etc but of course you'll get a corporation tax deduction for these.
 
if you are renting your home or part of it to a Ltd Co business then you should also be doing a personal tax return for this income.
 
kkelliher,
I am renting out the property I am living in from a landlord so that is not applicable to me. I guess its up the landlord who should be doing a personal tax return.
 
nmitchell said:
kkelliher,
I am renting out the property I am living in from a landlord so that is not applicable to me. I guess its up the landlord who should be doing a personal tax return.
Click to expand...

Technically you are incorrect if I have read your posts correctly

You pay the Landlord and You are then subletting part of your apartment to your company and you are writing this value off against your taxes. You are therefore technically getting pid by your company for the sublet and there is a possible return required. You should get professional advise to be sure of your position
 
Check what you have submitted on your tax returns for your rental tax credit (if claimed).

Also have a look at the PTRB form, if all the rent you are paying is recorded there, then KKelliher is correct and you are subletting and this is a form of income for you.
 
You should also check your lease to see if subletting is allowed, and also local planning to see if running a commercial operation (a business) from a residential property is allowed. If you are allowed to run a business from the residential premises, you will undoubtedly be charged commercial rates.

Hopefully your landlord is au fait with what you are doing and has OK'd it. As the property owner he has a right to know.
 

Going on a tangent here, but I know of one person who was running a business from their attic and was exempted rates as the business did not have its own entrance and therefore could not have a rateable value.

It was a few years ago, so the councils could have a workaround now.
 

That's taking nitpicking to the extreme. Many people run a business form home - barristers, sales agents, consultants, computer programmers, financial advisers etc etc. There's only a planning issue if members of the public are coming in and out. Similarly for rates.

Also, its not subletting as its not a business open to the public and the OP has a lease which should allow him/her to operate the house in the same way as if they owned the house. e.g. If its allowable in a dwelling that you own outright, then it shold be allowable under the lease.

In terms of tax deduction - it would be the percentage of the floor area required to operate the business that would be allowed. And once you are happy with your version of "reasonable expenses" and can back it up, then there is nothing to worry about from a tax point of view.

As for the overall issue - running the busness from a seperate office can make you work harder and give a better image to the business. It can also stop you working in evenings and weekends. Overall, if the business can afford it, a move to an office can be warranted.
 
mcaul said:
... Many people run a business form home - barristers, sales agents, consultants, computer programmers, financial advisers etc etc. ...
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Possibly and many people run businesses from their homes illegally and to the detriment of their neighbours / locality. Some might be in for a nasty shock if they check planning regulations. A residential property is a residential property is a residential property.

On another site (?) a man has problems getting a building currently classified as commercial to be re-classified as private. It's a garage and he wants to use it as .... a garage, residential that is simply for parking.
He is sub-letting (getting paid by a 3rd party) for a portion of a property he rents / leases from the owner.

I have no idea what his lease says or what it allows or disallows, but surely out of courtesy, ignoring any other issues, the landlord needs to be informed and make a decision one way or another, if he doesn't already know. If he does and/ or the lease allows for it then problem over, another box ticked.

BTW, if the rented residential address is given as the registered offices of the limited-company, in the landlord's position I would be seriously worried.
 
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