External forces have impacted many contractors’ ways of operating recently and for lots of us, that means working from home. While the service we deliver may be very similar, the taxable expenses are likely to have changed. With this in mind, it’s important to know what you can claim and how to go about it.
Expenses you can claim when working from home
As a contractor, you can claim expenses on a range of purchases and services that facilitate you working from home. As an Intouch customer, you can access additional advice to ensure you’re not missing out on any of this tax relief.
Working from home because of Covid-19
If you would usually be working on a client site, but have been conducting your business from your own house as a result of COVID-19 restrictions, you are likely to be able to claim tax relief on a number of things. These include everything from office furniture and computer software to internet access and rent.
Viable business expenses
Be prepared to be questioned by HMRC about whether purchases are viable business expenses or items that represent significant personal usage. In order to claim tax relief on them you must be able to demonstrate they have a business function and aren’t for personal use.
If you make a lot of business calls it’s worth installing a second line or taking out a business mobile phone contract. That’s because any business calls you make from your personal phone would have to be itemised to be claimed back, which is a time consuming process. Installing a new line and paying for it from a business bank account makes claiming expenses on it much more straightforward.
Similarly, it’s unlikely HMRC will offer tax relief on your internet bills if you only have one connection at home. Install a second internet connection in your company’s name and pay for it with your business bank account to show it’s for work use and you’ll be able to make a claim.
Computer equipment and software
Computers for work that will not be used for any significant personal tasks can be purchased directly via your business bank account and taxed accordingly. As they’re likely to be utilised over several tax years, you can expect them to be capitalised in your accounts and depreciated over time. Software should be expensed in the year it’s bought.
Rent and household bills
Contractors who rent can claim tax relief on parts of their home that are used solely as an office. This is calculated as a proportion of your rent reflected in the amount of space being taken up by your work activities. If it’s not just paperwork that you’re carrying out in your home office but the actual fee-earning work, you should submit an enhanced use of home as office claim. This will allow you to reimburse yourself for rent and household bills equal to the amount of time at home from your business account and minimise your corporation tax liability.
How to claim working from home expenses as a contractor
The most straightforward way to have your working from home expenses mitigated by HMRC is to submit a flat rate claim. This option enables you to request £6 a week, £26 a month or £312 a year for costs without having to provide receipts to prove any expenditure. Alternatively, go down the enhanced use of home as office claim route to reclaim a higher allowance, but expect to offer detailed evidence to support it.
Get in touch with Intouch for further advice on what you can claim while working from home.