sole traders - water bills and tax

markmarkymark · 06-03-2005, 11:23

yo all

Just a another quick question for all you sole trader types out there, that work from home....

Do you offset some of your water bills against tax. Elec and gas are easy and justified of course - I would have said water was as well (you need to drink and use the toilet as you work) - but thought I would get your views ...

Would you claim that same % for water as you do for elec and gas for example?

thx

mark

06-03-2005, 12:44

it sounds logical - if you had a water meter it would be easier

- but I am PAYE ..

Millay · 06-03-2005, 14:59

This is a whole grey area, I have been informed that as I live in the same area as I work, I dont have a seperate office but its in my bedroom. This means I can claim all my rent aganinst tax plus electricity and that, but I am going to employee a accountant to help me do my books in april, as I have never done it befire and think the money will be well spent

SMHarman · 06-03-2005, 21:32

You are best getting a local tax accountant to answer these questions. They will know what flies with your tax office.

Water as a consumable sounds a reasonable approach. When you get into council tax, mortgage etc you start a grey area that could initially save tax on your income but when you come to sell the house they point out that only say 7/8 is a principle private residence and the other 1/8 is a buisness propertly and not subject to the capital gains tax exemption.

A good accountant will let you know these things. Once I have got Mrs H's books straight I'm taking them to an accountants as the last time I studied tax law in detail was nearly 10 years ago and while the basic principles are the same the detail has changed and with tax law the devil is in the detail.

Flubflow · 06-03-2005, 22:29

As I read it...
Utilities can be claimed against profits for tax purposes at a fraction of the number of main rooms in the house. E.g. if you have 5 main rooms (don't count bathroom/toilet/closet rooms) and you use one of them soley for business purposes then you can claim 1/5 of your council tax/gas/electricity and rent/mortgage.

When you do this you may be liable, using the same fraction, to pay a business rate of council tax. E.g. in this case 4/5 of your council tax is residential rate and 1/5 is business rate. You'd have to speak to your local council about that. They may not be bothered if it just an office.

Also note that your household insurance may not cover you if you don't declare business use.

If the room you use for business is in any way used for non-business purposes as well (e.g. if you had merely used up half an existing spare bedroom for your business and it still has the bed in it) then it was thought that you could not claim any utilities/rent/mortgage at all even if there is some business use overall. It used to be that it had to be an itentifiable part of the home used exclusively for business but it has always been possible to claim so long as the amount claimed is reasonable and propotionate to the amount used for business (you may have to agree on a weekly/monthly amount with the IR).
One way round this is to have a sofabed for overnight guests to sleep in your "office" and still look official during the day (and there are no rules as to how "plush" you can have your office)

.

You can't claim the whole of your rent/utilities unless the whole property were turned over to business use.

Millay · 06-03-2005, 22:39

hmm interesting if a tad confusing, this is why i am going to get professional advice.. its intereting as I only pay a proportion of the rent its a shared house, with two rooms used for both business and living, and it has 2 shared rooms... ah well will worry when it comes to paying...

I am at present awaiting a quote from an insurance company to cover me for profesional imdemnity, public liability and my home office equipment plus mobile equipment... as I have recently become a member of check a trade so need to have public liability.. should have it anyway...

Never realised until i started how many overheads you get when you run ya own business

thanks flubaflow for a litle explanation..

markmarkymark · 06-03-2005, 22:43

Many thanks all for the usful comment and advice. I have been talking to an accountant and this is what raised my question which I was going to bring up with him anyway.

As I see it I think water is legit - as is council tax. However I understand that mortage is a real no no unless I want to pay capital gains tax when I move - as Mr H above points out.

My self employment is still really a hobby (I also have a full time job) - my basis period is to the 5 April 2005 so I was just going though stuff to see what else I might be able to claim against.....

My capital allowances have given me grief as well. I know how to calculate them - but it feels like I am out of pocket as I can only claim 50% as an allowance against tax in the first year. I'm sure there is a good tax reason for this but this of course 'increases' my profits and therefore the tax I pay on them. However since I have bought the goods I effectively have LESS money available to pay that extra tax - just seems odd to me !

thanks again all

Mark

06-03-2005, 23:56

I've certainly claimed a percentage gas, electric and ground rent/ service charges etc against costs when I was working as a sole-trader. I can't honestly recall if water was in there, but I'd be surprised if it wasn't.

I concur with the rest of Flubflow's comments and definitely recommend accountants. They cost money, but they'll most probably save you more than you're paying them and it saves you having to try to work out all the tedious details yourself!

SMHarman · 07-03-2005, 00:08

Quote:

Originally Posted by Millay

hmm interesting if a tad confusing, this is why i am going to get professional advice.. its intereting as I only pay a proportion of the rent its a shared house, with two rooms used for both business and living, and it has 2 shared rooms... ah well will worry when it comes to paying...

You cannot claim the place you sleep is entirely an office IYSWIM.
So both of you can claim say 1/3 of your rent bill is business use, on the basis you sleep 8 hrs, relax 8hrs and work 8hrs (yea right).

Quote:

Originally Posted by Millay

I am at present awaiting a quote from an insurance company to cover me for profesional imdemnity, public liability and my home office equipment plus mobile equipment... as I have recently become a member of check a trade so need to have public liability.. should have it anyway...
<snip>

Who did you ask. Seems the most awkward of insurances to buy.