As you can see, this Use of home as Office is a bit of a grey area for CGT. I think that the important point is not to use a room(s) *exclusively* for business. This does not mean that no income tax deduction is allowed.
As Ronald has said, too large a claim for such use might tend to jeopardise the PPR exemption for CGT.
I'm going round in circle's here.
Firstly I thought we were talking about Use of Home for Self Employed.
Then Doug quotes from a Tax Bulletin, but it concern's employee's.
Then he says the wording is virtually the same for the SE.
And now you refer to the Taxes Acts.
Upshot: I cannot find any reference to any maximum or guidelines about Use of Home for the SE. Unless I've missed something somewhere, which is what I'm concerned about.
I know all about 'wholly and exclusively'. But there are unwritten concessions, otherwise there wouldn't be any Motor Expenses and Telephone and Mobile etc.etc. in many sole traders accounts without the PU adjustment.
David
David, there is nothing in the Taxes Acts which says *specifically* that a taxpayer is entitled to deduct x per week in respect of Use of Home as Office.
The IR have permitted a lump deduction for all the years which I have been dealing with clients' Tax Returns. It is not really a concession, more an acknowledgement that trying to itemise small deductions can be time consuming and self-defeating.
I have already posted that certain expenses are capable of apportionment, and thus can stay within the "wholly & exclusively" test - which is the hurdle the self-employed need to jump to obtain the relevant tax deduction.
The fact that the IR have "conceded" the point for employees, in Tax Bulletin 68, means that it also can apply to the self-employed where the deductibility test(s) are usually less onerous.
"Ronald Raygun" wrote
RR, what "CGT return" is this? I didn't think that people needed to make a 'CGT return' for sale of "100% PPR"?
IR283 ("PRIVATE RESIDENCE RELIEF") states:- "If you meet all these conditions, you will not have to pay Capital Gains Tax on the disposal. You will not need to complete the Capital Gains Pages of your Tax Return..."
You are correct.
That's right enough, though he could have rented the place out for a few years prior to selling, in which case even if no CGT would turn out to be payable in respect of the rental use (ignoring the room-as-office aspect), he would still have had to complete the CGT pages. He could then have omitted to mention room-as-office use in respect of the period when the rest of the house was indeed his PPR.
I should have worded it better, to include the more usual case of implicitly reporting 100% PPR use by failing to complete CGT pages. In this case interest could only be aroused as a result of trawling the Land Registry, which I suppose must happen to some extent. I'd expect it to be pretty rare for someone to come knocking on one's door to ask why CGT pages had not been completed and business use not been declared.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.