Due to Coronavirus pandemic, decision of lockdown has been taken by UK government and directors, managers, employees all are working from home in order to continue business operations smoothly.
You must have knowledge and good understanding of various expenses which you can claim in this difficult time of Coronavirus while working from home. In this blog, we differentiate the expenses which you can claim –
- As a self-employed person
- As an employee
- As a company owner manager
- Expenses you can claim as a self-employed person
- Expenses you can claim as an employee
- Expenses you can claim as a company owner manager
Expenses you can claim as a self-employed person
Self-employed person can only claim those expenses which are wholly & exclusively for business purpose. You can claim a proportion of various expenses while working from home such as electricity, heating, mortgage interest or rent and council tax. You can use reasonable, sensible and logical method of calculating the cost that is acceptable to HMRC by taking the following factors into consideration suggested by them –
a. How much area of your house you are using for business purposes
b. What utilities you are using while working from home
c. How long you have used it for business purposes
In order to calculate the amount of expense claim while working at home, you can use HMRC approved flat rates by using the simplified method of calculation. You are eligible to use this method in case you are working 25 hours or more from home per month. This flat rate method does not include telephone or internet expenses. You can calculate the actual cost by working out business proportion of the bills. Let us go in detail and find out which method is beneficial to you –
Expenses you can claim as an employee
In the case of employee, treatment of home working expenses totally depends upon whether your employer approves your expense claim and makes you a payment or not. Generally, to make an expense claim for relief as an employee, you are allowed to work from home only if the same is mentioned in your contract of employment. In most of the cases, checking as well as professional advice is needed before making any claim. In this difficult situation of coronavirus, when offices are closed and every employee working from their home or in self-isolation, some relaxation in rules has been offered to them.
In case employer chooses to reimburse your claims of additional cost you incurred while working from home - You will be paid with tax free amount if reimbursement is not more than £6 per week (earlier it was £4). In case the reimbursement amount is less than £6 a week, less records need to be kept to verify the expense claim whereas if reimbursement amount is more than £6 a week, settlement to be done with HMRC via agreement in order to justify the cost. Detailed records should be kept for the same.
Expenses you can claim as a company owner manager
When a company owner manager works from home, “Use of home” claim cannot be allowed by the company as home does not belong to the company and you may not allowed to use HMRC approved flat rate expense in order to calculate your claim cost.
The only claim that a company may reimburse for the owner manager is £4 per week. Owner manager may charge a rent from the company for its home being used for business purpose.
When the company decides to make rental payments to company’s directors, owner manager must go for the following –
a. A non-exclusive rental agreement to be made between company & individual.
b. Rental income must be reported to HMRC through tax return.
However, portion of relevant expenses can be claimed by owner manager on their personal return. It can be beneficial for owner-manager’s paying rent or having high mortgage interest payments. You may not claim deduction on mortgage capital repayments but you can avail property allowance of £1000 additionally. This allowance is not available between connected persons.
In order to avoid complicated calculations, record keeping as well as disclosures, we recommend that most of the company owner managers may go forward and reimburse the amount of £4 per week.
In case you want more information or advice on what & how to claim expenses you incurred when working from home in the time of Coronavirus, kindly call us on 03330886686 or you can also e-mail us at firstname.lastname@example.org
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