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If you work at home, you will want to claim the extra costs of running a home office on your tax return, or from your employer. There are different rules for different taxpayers and what can be claimed will also depend on your employment status.
What you can claim
If you are a self-employed person, you can claim costs in your accounts that are incurred wholly and exclusively for the purpose of your business.
Having somewhere to do your business paperwork is essential. If you don't maintain a separate office, you can claim a reasonable proportion of those household running costs that represent the space and time in which your office operation occupies your home. This includes a proportion of your rent, council tax and water rates. These costs can include mortgage interest payments, council tax and home insurance, metered water rates, heat, light and power. You may also be able to claim for a proportion of repairs/maintenance and certain running costs such as cleaning.
If you are an employee
If you are an employee, you can only claim the additional variable expenses incurred by working at home. These costs amount to the increased energy needed to heat and light your property for longer, and the extra water used if that is metered.
You can also claim the cost of business related telephone calls, but not a proportion of telephone line rental, or part of your mortgage or insurance costs. These amounts are considered to be fixed whether or not you work from home, so you can't reclaim any part.
Reclaiming the costs
HM Revenue & Customs prefers employees to reclaim the costs of home-working from their employers. If you have agreed with your employer that you will work at home for all or part of your working time, your employer can reimburse you for the extra energy used during that time.
If you want to claim more than £4 per week, excluding telephone calls, you must be able to demonstrate that your energy bills have increased by more than this amount.
The HM Revenue & Customs view
If your employer does not reimburse your costs there are some extra conditions to be met before you can make a claim for home-working expenses on your tax return:
- The duties performed at home must be 'substantive' - that is, they must represent 'all or part of the central duties of employment'
- Your work must only be possible with certain facilities, such as a specific item of hardware or computer software
- Those special facilities must not be available for you to use at the company's offices
- You must have no option but to work from home.
Your claim will fail if you have any choice about working from home. HM Revenue & Customs advise that you are deemed to have had a 'choice' even if your employment contract stipulates that you must work from home, if you were also offered a different contract without that stipulation.
In that instance, you can't claim any expenses. This might seem very harsh but it is the interpretation of the law given in the HM Revenue & Customs Tax Bulletin number 79.
The best approach might be for your employer to reimburse you directly for the additional costs of working from home. Contact us for more specific advice.