Working at Home

If you take things home to work on or you make important conference calls at home then you are going to need somewhere you can shut yourself away from the rest of the household. However, why should you have to pay the bill when it is the company business you are working on?

Zero Tax

Some companies have tried to pay a flat rate for 'use of home as office' and claimed a deduction for it on the P11D (annual return of benefits and expenses.) This would then also go on a self-assessment tax return as income. They then put this down on the next page as an expense incurred in doing the job. Therefore, we now have a zero tax bill as the income matches expenditure. The taxman however has other ideas.

Taxman's View

Inspectors believe that this isn't a benefit-in-kind but money that should be added to your salary. If the company pays you £50 per week for use of home as office then you will end up having to pay NI and income tax on that value (£1,807 tax and NI.) The employers' NI would still be the same, as would the company's tax deductions.

Salary Addition

A recent addition is an extra £2 a week that can get paid tax-free on top of your salary to cover the additional costs of working at home, however there is a more generous sum on offer.

Solution

It is possible to get the company to give you payment that is treated as rent instead of salary/benefit. A tax deduction is given to the company for rent paid (as long as its not too excessive) and if the rental income equals your expenses you will have a zero tax bill.

Rent

To decide on the level of rent received from the company you must decide what expenses are properly attributable to the provision of furnished accommodation. These would include a proportion of heating and repair costs, maintenance, repair costs and a proportion of mortgage interest in fact it extends to any expenses you incur in providing the accommodation. You must agree the proportion with the company based on the actual use. The rent can always be negotiated higher if the use of accommodation is stretched to hold board meetings especially if there is no room as the office to do so. Also if a meeting goes on for a long while and you end up providing dinner then the company can be asked to pay for this too. Also you will not have to pay any Capital Gains Tax on this part of the house as it is classed as a 'common area' so you can use it for business and pleasure.

Evidence

To back the rental income up it would be advisable for you to make a formal rent or license agreement between the company and the property, this doesn't need to be a complicated or highly informative document, it just needs to specify what has been agreed.