Working from home we’re allowed to expense certain amounts to cover energy bills as a proportion of the household bills. As a sole trader this was easy as I simply used the HMRC fixed amount, and I’ve continued to do this by claiming as a out-of-pocket expense. But with the hike in energy prices and change to a Limited company I’m not sure that’s the best way to continue.
Is there a sensible way to calculate the amounts that can be claimed, and which accounts would be used for transactions given I’m the sole Director/Employee of the company and that we’re on a dual fuel contract?
As a limited company director, I stick with the £26/month allowance and do a recurring journal. I have a dedicated category for Working at Home Expenses. Personally, if you don’t have an accountant to advise on doing it right, I would stick with that. You may find by the time you’ve done a methodology and taken the time to apportion the bills according to space and time, as well as maintaining the evidence, that the extra money you get isn’t worth it. If you do have an accountant anyway, then ask for their advice based on your circumstances.
Thank you Martin. In fact, I tried doing some basic calculations using a spreadsheet and it became quite complex, especially with the huge variations in energy costs that we’re experiencing and the result shifts in the gas bills throughout the year going from very little to eye-waterings amounts in the winter months. The £26 flat rate does make it so much easier, so I will stick with that too.
So, if I’ve understood correctly, I need to create a new journal, say 7204 - Flat Rate, then post the £26 to that journal each month and Tag it to the Director’s Loan Account so I can then reimburse myself whenever suitable?
The flat rate is really the best approach. You could claim a proportion of actual bills, but you would have to work out a reasonable proportion to claim, based usually on floor space as a proportion of the house, and then hours worked compared with not worked. If you have a dedicated office at home it’s less onerous, but if you use a kitchen table, say, it’s much more complicated. It often works out at less than the £26 per month anyway, although I haven’t done it since the recent rises.
The flat rate doesn’t cover telephone or broadband, although you can only claim broadband tops over and above what you would pay for an ordinary personal connection. Telephone I usually allow pretty much the whole of a director’s mobile phone bills, unless you are incurring lots of additional charges for personal MMS messages or calling abroad.
Yes - That is similar (I think I specifically called mine working at home expenses) to what I’ve done. With Journals, you can set it to be recurring which makes it even simpler.
If you have multiple companies (same Director(s)), can each Director claim the £26/month from each of the companies?
Similarly, trivial benefits for directors (£50 limit each time up to maximum of £300 per year) - can these also be given from multiple companies owned by the same Director(s)?
The allowance is supposed to represent the additional costs of working from home. As such, it should be apportioned between the different companies you are working for. You can’t claim £26 per month from each company. However, if you have 2 directors of the same company both working at the same address, e.g. husband and wife team, then they can each claim £26 per month in total.
In terms of trivial benefits “There is no limit to the number of trivial benefits that an employee can receive in a year, except where the individual is a director in a close company. In this case, the total value of trivial benefits cannot exceed an annual cap of £300.”
You only have to pay business rates if you have more than 3 people working there. If you only use the room for business purposes, it doesn’t qualify for principal private residence relief, so capital gains tax would be payable on the sale of the property. However, if it is mixed use, that doesn’t apply.
All I really meant was one room which you use as your office, makes apportioning household bills between hone and business simpler than if you use different rooms at different times.