HMRC’s rules on whether you can claim the use of your home as an office or renting part of your home to your limited company as an expense, are complex. There are slightly different rules that apply depending on whether you’re a limited company or self-employed (sole trader). We’ve written an article to explain the rules and what you can and can’t claim for working from home on our Knowledge site.
Recording home office expenses for your limited company in your Crunch account:
As we outlined in our knowledge article, If you work at home and you run a limited company, the easiest approach is to use HMRC’s published allowance for the additional costs of running your business from home. HMRC allows you to include up to £208 as an expense in your accounts each year (or £4 per week for each week worked at home if usage is for only part of the year). HMRC doesn’t consider this amount to be a Benefit in Kind - so you have no personal tax to pay on the amount.
When we produce your annual accounts, we’ll ask if you carry out substantive duties relating to your business at home and whether you wish to include the £208 amount for use of your home as an office expense.
Use of home as office expenses:
For most businesses, we recommend you include only £208 per annum (£4 per week) as an expense for using your home as an office in your annual accounts.
What you need to do on the Crunch system is:
under Suppliers add a new supplier with the name Use of Premises
add £4 a week, under Expenses as 'Premises Costs > Use of Own Premises' and mark it with a payment method of 'Paid by Director personally', alternatively, you can create just a single expense for the full amount of £208 once per year.
Companies may include more than the £208 amount in their accounts as a 'rental expense' if you use part of the home you own to work for a significant part of the working week. However, this approach is complex and involves establishing a license to occupy the premises (rental agreement) between the individual company director who owns the property and the limited company. Again we explain the steps you need to take in our working from home Knowledge article.
To prove that your rental expenses are reasonable, the paperwork and calculations to support the amount included in your accounts need to be detailed and comprehensive. Because this is a complex area, we’ll make sure a senior Crunch accountant reviews this for you.
Our Rental expenses spreadsheet can be used to calculate how much you may be able to charge your company as a rental expense. Crunch accountants will check the calculation at your year-end and query any unreasonable or excessive items.
The director issuing the rental agreement will have to include the rental income on their annual Self Assessment tax return. There are also important Capital Gains Tax implications that you need to be aware of as explained in our working from home Knowledge article. If you have any questions please speak to one of our accountants.
Recording rental expenses in Crunch:
If you do set up a rental agreement you need to do the following in your Crunch account:
Under Suppliers add a new supplier with the name Rental charge
Add the monthly rental amount under Expenses as 'Premises Costs > Rent'.
We suggest the payment is processed monthly, to evidence enforcement of the rental agreement