UK Small Business Tax Enquiry


rdp

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Hi

I am a sole trader who operates out of my spare bedroom. The end of the financial year is approaching and I understand that I may be able to charge my business for rent of the room and costs towards other issues such as heating etc. Can anyone provide a very basic overview of what can be claimed back off my company and how much you can get away with without worrying the tax man?
 
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If you're a sole trader, then you can claim a proportion of certain household costs (such as mortgage interest, council tax, light and heat) as business expenses. The proportion of the costs that you can claim will depend on how the room is used in your business - if you use the room each day from 9am to 5pm, you can claim more than if you just use it occasionally to write up your business records.

The HM Revenue & Customs guidance on this issue is here. This guidance includes a list of the type of expenses that can be claimed and has a page of examples.
 
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Since your household bills will be for the entire household rather than the one room you work from, you will need apportion such bills and then apply the cost to your business expenses. This apportionment needs to be completed on a reasonable basis, such as floorspace, but you must use the room in question for a substantial part of every day in the course of running your business. If you only complete business records for a.short period of time each day then the standard daily rate supplied by HMRC will apply rather than an apportionment of household costs.
 
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rdp

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Thanks so far - one more query!

Thank you all for your responses. Most helpful. One more query if I may...

If I were to purchase an office pod to put in the back garden for exclusive use by the business, would similar issues remain? Can I offset the cost of procuring the office pod against the business?
 

rdp

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I should have clarified, I operate my business broadly between 9am - 5pm five days per week.
 
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I would say that this is 100% qualifying business expenditure. Am I right in thinking that there would be no private use of the pod?
 
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rdp

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I would say that this is 100% qualifying business expenditure. Am I right in thinking that there would be no private use of the pod?
That's correct - purely for my own sole trader business. So does that mean I can purchase through the business and write the whole amount off against my subsequent tax bill, or just a proportion of it? Thanks for your help so far.
 
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It is qualifying expenditure but it will be an asset on the balance sheet and instead of deducting the full expenditure from your profits you will need to claim a capital allowance.

How much approx. will you be spending on the office pod and fit-out (furniture and equipment)?
 
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rdp

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It is qualifying expenditure but it will be an asset on the balance sheet and instead of deducting the full expenditure from your profits you will need to claim a capital allowance.

How much approx. will you be spending on the office pod and fit-out (furniture and equipment)?
I'm looking at around £15,000 for the pod in total.
 

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