Myself and my partner have purchased a new home and I'm looking at the
possibility of setting up a home-based business in the new property.
Having had a look at the archives I see that there are potential issues
relating to working from home, both ongoing during the tenancy (in terms
of business rates) and when selling on the property (in terms of capital
gains on the portion of the property used exclusively for your business).
I'd like to be able to quantify these costs so that I can judge whether
the risks outweigh the benefits in my situation.
Firstly, if I were to run a business from home that NEITHER required
customers visiting the premises NOR required significant additional
refuse collection (e.g. a purely internet-based business that is only
likely to generate a small amount of scrap paper) what is the council's
view likely to be regarding business rates? Also, will any business
rates levied be IN ADDITION TO or INSTEAD OF council tax? i.e. If the
council were to levy business rates on that part of the property used
for a business, will they deduct an appropriate percentage from the
C-Tax to account for the fact that only a percentage of the property is
Secondly, let's assume that I set up a boxroom in the house as an office
and claim, say, £500 against the profits of the business for "use of
home"? (this amount seems to be standard practice among many
accountants) Am I right in assuming that I may have to prove this
deduction at the drop of a hat, or does HM Treasury allow such a figure
as a fair estimate for a single-room home office in the same way that
they allow 10% of rent as a rough and ready depreciation charge for
property letting businesses?
I understand that having a dedicated office in the house potentially
excludes that portion of the house from PPR CGT exemption upon sale of
the property. To get a handle on the likely extent of the CGT liability,
I'd like to put forward a hypothetical situation with actual figures and
ask what the likely tax bill would be (based on today's rules, of course
- I know they could change in future). If I were to live in the property
for 10 years and the percentage of profit on the sale allocated to the
office was £100K, how would the CGT bill be calculated?
Also, I am currently looking at the self-employed pages on the tax
return and they ask for an address for the business. What consequences
might there be if I were to supply my home address for the "business" in
question purely for the purpose of the tax return? Ditto if I were to
voluntarily register for VAT status using the same address. Are there
other types of address that would be acceptable to use as registered
business addresses, thus avoiding the need to use your private residence
on such forms, with the all the financial complications that might involve?
- posted 15 years ago