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Why do your workers need to be in an office?

More and more office based workers are now working from home and the employers are focusing on Output rather than hours. For generations work has meant 8 hours per day at your desk but that’s changing.

Switching from office based to home based is best done in stages, starting with a couple of days home based and building up.

Increasing the numbers of UK employees working from home can cut costs by £3 billion a year for UK employers and employees and save over 3 million tonnes of carbon a year, according to a report released in May 2014 by the Carbon Trust.

Advances in technologies such as broadband internet, smart phones and cloud computing mean that many jobs can now be done effectively outside of traditional workplaces.  This has resulted in a significant increase in the number of UK employees who work from home, with the total now standing at over 4 million out of a workforce of 30 million.

Investigating the potential environmental benefits of a further shift to homeworking, the new research concluded that, if adopted and encouraged by employers across the country, homeworking could result in annual savings of over 3 million tonnes of carbon and cut costs by £3 billion.

Over 40 per cent of UK jobs are compatible with working from home, but recent research by the Carbon Trust has found that only 35 per cent of companies have a policy allowing their employees to work from home. And where homeworking is offered by companies, between one-third and one-half choose not to accept it.

Homeworking reduces employee commuting, resulting in carbon, money and time savings. If office space is properly rationalised to reflect this, homeworking can also significantly reduce office energy consumption and rental costs.

It is estimated that UK employees save an average of £450 per year if they work from home for 2 days a week.

A UK employer could save around £280 per homeworker per year (according to Indicator).

Ian Foddering, Chief Technology Officer & Technical Director at Cisco UK & Ireland, said:

“By 2018, there will be over 10 billion mobile-connected devices globally, as such, telecommuting will not only become commonplace but is already in the progress of fast becoming the most natural way for people to work and collaborate globally. Cisco has aggressive targets to reduce greenhouse gas emissions from our operations and suppliers worldwide, and telecommuting is helping us to achieve these goals.

“The average Cisco employee telecommutes 2 days a week, and those using our Cisco Virtual Office technology typically work from home 3 days each week. In total, this amounts to avoiding 35 million miles of commuting per year. Not only is this great for the environment, reducing Cisco’s CO2 emissions by 17,000 tonnes annually, but it’s also great for business, with an estimated $333 million per year made in productivity savings.

“Although some organisations may experience cultural barriers in adopting telecommuting, we believe our experience at Cisco demonstrates the real benefits to the environment, the business and the individual employee.”

Employers are also saving £6k by opting for Freelancers…

A survey by PeoplePerHour has shown that the self-employed segment of the labour market in both the UK and USA is growing at a rate of 3.5% per year – faster than any other sector. Should this growth continue for the next five years, researchers predict that half of the working population could be self-employed freelancers by 2020.

The survey also suggests that small businesses that hire freelancers instead of full-time employees could save £6,297.17 per annum. The survey shows that the average waste or spare capacity for each employee in a SMEs is 1.9 hours per day.

The research identifies a number of key drivers behind the shift from employment to self-employment, including “the availability of ubiquitous and inexpensive computing power, sophisticated applications and cloud-based services“. [Lawdonut]

 

 

steve@bicknells.net

Hobby Trading Losses

You might think you have a business, but HMRC can disagree with you.  If HMRC considers that you are never going to make a profit, they will also refuse any loss relief.

Losses and profits

You might think that HMRC is being unfair in refusing loss relief, but if your activity is a hobby you won’t have to pay tax on profits either.  This rule can be tricky as revealed in the case of P, when  HMRC dismissed his claim for loss relief.

Trade or personal loss?

HMRC challenged P’s claim at a tribunal because in its view it related to non-business transactions and so was a personal financial loss and not one arising from a trade. Non-trading losses can’t be set against taxable income and it’s not just HMRC being difficult.

Trading tests

HMRC and tax specialists refer to the so-called “badges of trade” to decide if a trade exists. These tests were set out in a court judgment decades ago, but remain valid today. One of the tests to establish if a trade exists is that there must be an intention to make profit from a business. In P’s case the tribunal extended this test a little further.

Incapable of making a profit

P started two “businesses”, neither of which made a profit because, in the tribunal’s view, he was inexperienced and couldn’t devote enough time to them. Neither venture was capable of making a profit without P reducing the hours he spent in his main job. In essence P didn’t have the business acumen or time to devote to making his business profitable.

Putting the boot on the other foot

The ruling in P’s case is useful, not just for guidance on when losses are deductible, but for countering HMRC if it claims money you make from a hobby is taxable. Its view has always been that if you advertise your hobby in a newspaper or online you’re probably trading. But the tribunal’s judgment, supported by HMRC, dispelled that idea. If you don’t have the time or intention to carry on a trade, profit you make from isolated sales isn’t liable to income tax.

Turn your hobby into a business

For advice on converting your hobby to a profitable business, including help with setting up a limited company or registering for VAT, please contact Alterledger.

Simplified Expenses – Working From Home

Beautiful young woman with coffee using laptop in the kitchen

Most people working from home were claiming the £4 per week allowance based on HMRC guidance, but this has now been updated for the self employed.

You can now calculate your allowable expenses using a flat rate based on the hours you work from home each month.

This means you don’t have to work out the proportion of personal and business use for your home, eg how much of your utility bills are for business.

The flat rate doesn’t include telephone or internet expenses. You can claim the business proportion of these bills by working out the actual costs.

You can only use simplified expenses if you work for 25 hours or more a month from home.

Hours of business use per month Flat rate per month
25 to 50 £10
51 to 100 £18
101 and more £26

Example

You worked 40 hours from home for 10 months, but worked 60 hours during 2 particular months:

10 months x £10 = £100
2 months x £18 = £36

Total you can claim = £136

Use the simplified expenses checker to compare what you can claim using simplified expenses with what you can claim by working out the actual costs.

https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Alternatively you could claim you can claim a proportion (based on the number of rooms and hours of business use) of your household expenses

  • Mortgage interest or rent
  • Council tax
  • Water rates
  • Repairs and maintenance
  • Building and contents insurance
  • Electricity
  • Gas, oil or other heating costs
  • Cleaning
  • Telephone (based on usage)
  • Broadband

You can draw up a home rental agreement to reclaim these costs.

The Rental Agreement can be very basic, it just needs to show:

  • The Parties – Employee, Company, Home Office Address
  • The agreement is for use of the accommodation, furniture etc (‘the Home Office’)
  • The hours it will be used
  • The rental charge

or your could use an agreement like this one

https://www.rocketlawyer.co.uk/documents-and-forms/home-office-space-agreement.rl#

If the rental is only to cover costs (and not to make a profit) then it should not create any tax liability.

Some experts say that claiming Mortgage Interest and Council Tax can be queried but that would depend on circumstances.

There are also other isuues to consider such as VAT and Capital Gains and these are covered in the blog below.

http://stevejbicknell.com/2013/01/06/what-are-the-tax-issues-and-advantages-of-a-home-office/

steve@bicknells.net

Doctor help my Travel Expense has been disallowed

The raised traumatism on road

On the 16th December 2013 Dr Samad Samadian v HMRC had his appeal on Travel heard by The honourable Mr Justice Sales and it was decided to uphold the previous decision of the First Tier Tribunal.

After an enquiry lasting more than seven years and three tribunal hearings, the First-tier Tribunal led by Judge Kevin Poole acknowledged Dr Samad Samadian had a dedicated office in his home which was necessary for his professional activity.

However, the panel did not accept that the home office could be treated as the starting point for calculating private practice business mileage involving habitual journeys.

So in summary:

  • Home to Hospitals – Disallowed
  • Hospital to Hospital – Disallowed as Business Expenses (but could be allowed against Employment)
  • Visits to Patients – Allowed

Now would be a good time to check your tavel mileage claims to makesure they are valid.

steve@bicknells.net

20 businesses you can run from home

British piggy bank

It’s nearly Christmas and that puts a strain on most peoples cash, so you might well be looking for ways to earn extra cash, here are my top 20 home based business ideas:

  1. Get a lodger – Under rent-a-room a taxpayer can be exempt from Income Tax on profits from furnished accommodation in their only or main home if the gross receipts they get (that is, before expenses) are £4,250 or less
  2. Ironing and Laundry Services – Always popular and you can start with friends and family
  3. E Bay Trading – as E Bay say… The first task is to sort through those bulging drawers and messy cupboards, finding stuff to flog. Get a big eBay box to stash your wares in, and systematically clear out wardrobes, DVD and CD piles, the loft and garage. Use the easy 12-month rule of thumb to help you decide what to offload: Haven’t used it for a year? Flog it.
  4. Blogging – Blogging has taken off and many businesses are looking for people to write blogs for them
  5. Candle Making – You can sell the candles on line and its easy to buy the wax and things you need to make the candles
  6. Car Boot Sale – As with E Bay but without going on line
  7. Cake Making – Make sure everything is labelled correctly and you comply with Health & Safety issues
  8. Data Entry – The internet makes it easy to enter data from where ever you are
  9. Social Media – Similar to blogging, businesses need help to manage Twitter, Facebook and Linked In
  10. Website Design – If you have the expertise, go for it
  11. Sales Parties –  Cosmetics to Ann Summers, there is a long list of opportunities
  12. Sewing and Clothes Alterations – Perfect before and after Christmas
  13. Jewellery – Making and selling jewellery is always popular and great for Christmas presents
  14. Car Repairs – Assuming you have the skills needed and comply with legal requirements
  15. Pet Care – Walking dogs or grooming is popular
  16. Virtual Assistant – Also personal organiser or personal shopper
  17. Wedding Planner – You could start by creating a blog about your expertise
  18. Direct Sales – For example Utility Warehouse
  19. Computer Repair – Great provided you have the skills
  20. Marketing – Telesales to leaflet design and freelance writing

steve@bicknells.net

12 really quick and easy tax tips for PAYE workers

  1. Child care vouchers –  if you have children attending a nursery or looked after by a professional childminder, your employer can join a Childcare voucher scheme. This allows for £55 of the weekly cost to be deducted free of tax and NI if you are a basic tax rate payer, or £28 if you are a higher rate tax payer.
  2.  Pensions – if you pay into a work pension scheme, 20% tax is automatically deducted. For high rate tax payers, you can claim additional relief either by declaring it on your Self-Assessment or calling the taxman.
  3.  Company cars – are a pain and the tax is huge BUT if you have a company van, the benefit in kind is capped at £3,000 so for a basic rate tax payer the cost of driving is only £600 or £1,200 for a higher rate payer.
  4.  Professional membership fees – your membership to a recognised trade or professional body it is a deductible expense, but not for your hobbies.   
  5.  Share incentive schemes – there are loads of schemes that allow either NI or Capital Gains Tax to be saved, you don’t have work for a listed company either.
  6.  Giving your work colleagues a lift to work – if your employer encourages car pooling you can claim 5p a mile for the passenger without incurring any additional tax charge.
  7.  Cycle to work – get your employer to provides a bike both for travel to work and play, it’s not considered as a benefit in kind.
  8. Then after a time you can buy it off them at market value.
  9.  Season ticket loans – your company can advance the cost of an annual season ticket up to £5,000, much cheaper than buying a ticket weekly.
  10. From April 2014 this increases to £10,000 (not really sure if that’s a blessing?)
  11. Electric Cars – from April 2015 there’s no benefit in kind.
  12.  Working from home – it is becoming increasingly more common for staff to work from home. You can claim £4 a week allowance without having to produce receipts.

Any questions contact the author at niall@odfinancialservices.co.uk

What expenses can I not claim when I am self-employed?

Woman sitting on coinsWhen you are operating a business as a sole trader, you will need to complete a self-assessment return for your income. Self-employed income is taxable after deducting allowable expenses. Previously I talked about the expenses that a sole trader can claim but now I am going to tell you about the expenses that you cannot claim.

Non allowable expenses for sole traders include:

Your own wages and drawings, national insurance contributions and pension contributions.

Childcare costs. These can only currently be claimed through a limited company scheme.

Subsistence. You can only claim for hotel and meal costs if you have an overnight business trip. You cannot claim for other meals including lunches, snacks and coffee.

Any business entertaining including entertaining clients and suppliers and hospitality at events.

The purchase cost of business premises and any costs relating to a non-business part of your premises. Also the cost of improving and altering premises and large equipment.

Motoring costs like fines, purchase cost and travel between home and work.

Repayment of loans, overdrafts and other finance solutions.

Some professional fees like the legal costs of purchasing property and large assets. Also the cost of settling tax disputes and fines.

Payments to clubs, charities, political parties.

Cost of ordinary clothing even if you only wear it for work.

Personal use including goods bought for personal use, the personal proportion of your home costs if you work from home, personal phone calls on your mobile phone etc.

Rebecca Taylor

What expenses can I claim as a sole trader

business person with calculatorWhen you are operating a business as a sole trader, you will need to complete a self-assessment return for your income. Self-employed income is taxable after deducting allowable expenses. None of us want to pay more money than necessary to HMRC so use this guide as a starting point to ensure that you are claiming all you can.

There are two main types of expenditure:

Capital expenditure

Capital expenditure is money spent on items (assets) that will have a useful life to the business of more than one year, for example premises, furniture, machinery, vehicles, tools, IT equipment.

These costs cannot be included when working out taxable profits. However you can claim Capital Allowances which give tax relief for the reduction in value of the assets.

Revenue expenditure

Revenue expenditure is the allowable expenditure which is incurred in the general day to day running of a business. This can include:

Cost of goods bought for resale and cost of producing goods that you are going to sell or use in providing your goods or services to sell.

Employee costs including wages, employers’ National Insurance, benefits for employees, agency fees, subcontractors and training.

Business premise costs including rent, rates, utilities, maintenance and cleaning.

A proportion of your home costs if you work from home, including a proportion of the costs for rent, rates, utilities, mortgage interest, maintenance and cleaning. The costs should be apportioned based on how much of the home is used for business and for how much time if not exclusively. Or you can claim a fixed rate of £4 per week (from 2013-14).

Office running costs like phones, mobiles, broadband, email hosting, postage, stationery, printing, software and small office equipment.

Vehicles including the running costs (petrol, car tax, insurance, repairs, MOT and servicing). If the vehicle is also used privately, you can only claim for a proportion of the cost in relation to how much the vehicle is used for business mileage. Business mileage includes trips to the bank, post office, business meetings and networking events.

Mileage can be claimed instead of a proportion of the running costs of a vehicle if your turnover is below the VAT threshold when you acquired your vehicle. Mileage rates are 45p a mile for the first 10,000 business miles a year, then 25p a mile.

Travel, meals and accommodation including hotels when an overnight stay is required for business.

Business insurance including public liability, professional indemnity and employer liability.

Marketing and advertising including PR, free samples, networking, website maintenance costs, printed ads and brochures.

Magazine subscriptions if they are relevant to your business or are for client reading in a reception area.

Professional fees are usually allowable. Legal fees for drawing up contracts and terms and conditions are allowable as are your accountant’s fees for completing the year end accounts. Architect and surveyors fees are also allowable.

Bank, credit card and other finance charges including overdraft charges, hire purchase interest and lease payments.

If the expense relates to business and personal cost, only the business cost is deductible but also if the expense is dual purpose then no deduction is allowed. Always remember to keep detailed records of your transactions and keep copies of receipts and invoices as back up (these can be the originals or scanned copies on your computer).

Rebecca Taylor

So you think your mileage claims are ok……..get ready for a shock

Highway Robbery

According to Tom Tom 72% of businesses felt mileage claims were over stated and 50% of businesses don’t regularly check mileage claims.

How do you monitor mileage claims from your employees?

The news could be even worse for contractors…

Its probably fair to say that most contractors who have an office at their home claim business mileage when they visit clients, but things could be about to change for the worse….

In what could become a landmark decision in the interpretation of “wholly and exclusively” allowable expenditure, a doctor has lost a protracted battle with HMRC over his business mileage claims.

After an enquiry lasting more than seven years and three tribunal hearings, the First-tier Tribunal led by Judge Kevin Poole acknowledged Dr Samad Samadian had a dedicated office in his home which was necessary for his professional activity.

However, the panel did not accept that the home office could be treated as the starting point for calculating private practice business mileage involving habitual journeys.

Potentially, the decision has wide implications for all professional self-employed activity, where the business owner undertakes substantive work at home, but also has another business base at which they deliver their expertise regularly.

http://www.taxation.co.uk/taxation/Articles/2013/02/13/53821/way-go-home

It is understood that Dr Samadian will be appealing.

But this could lead to Consultants paying back thousands of pounds in tax.

steve@bicknells.net

What are the tax issues and advantages of a Home Office?

Fotolia_46578927_XS home off

Working from home is a popular option for business owners and employees. Assuming you need to create office space you could either convert an existing room, loft, or garage or build a new structure in the garden.

VAT

  1. Estimate the amount of Business & Personal Use – you can only reclaim VAT on the Business Use proportion – you might have 100% business use if you were building an office in the garden. HMRC’s published and internal guidance states,
    “Where a domestic room or rooms is put to business use, you may agree to an apportionment using an objective test to the extent to which the room is put to business use” http://www.hmrc.gov.uk/manuals/vitmanual/vit10000.htm, and VAT Notice 700, Section 33,
  2. The invoice should be in Business Name
  3. You can reclaim 100% VAT on Office Equipment used entirely for business purposes (if you reclaim VAT you need to charge VAT if you sell the equipment)
  4. If you then sell your home to a buyer who wants to use the premises as part of their dwelling you don’t charge any VAT as it will be exempt

Capital Allowances

Capital Allowances are not given on land and building but you could claim for integral features, assets and equipment. Sole Traders and Partners can exclude a proportion for private use.

Benefit In Kind

Directors and Employees who have personal use of the assets will incur tax as it will be a benefit in kind. So it might be better to keep business assets for business use only to avoid this tax. Here is my blog comparing Directors Loans to Use of Assets http://stevejbicknell.com/2012/04/14/directors-loan-vs-private-use-of-company-assets/

Expenses

You can claim a proportion (based on the number of rooms and hours of business use) of your household expenses

  • Mortgage interest or rent
  • Council tax
  • Water rates
  • Repairs and maintenance
  • Building and contents insurance
  • Electricity
  • Gas, oil or other heating costs
  • Cleaning
  • Telephone (based on usage)
  • Broadband

You can draw up a home rental agreement to reclaim these costs, or claim expenses, or if the use is minimal you might find it easier to claim £4 per week as suggested by HMRC.

Here are some examples http://www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

Capital Gains Tax

Your principle private residence is exempt from capital gains but your home office won’t be if its exclusively used for business, but it will only be a small proportion of the property value and as such any gain will probably be covered by your annual allowance £10,600 (2012/13) if you are a sole trader or partner, if not your company could have a small amount of capital gains tax to pay if a gain is made.

If you are a sole trader or partner and there is a private use element to your home office then the office will be exempt.

Other Issues to consider

Planning Use -You might wish to apply for a Certificate of Lawfulness (Proposed)

for a change of use, for example if you wanted to use a single room in a dwelling house as an office. http://www.stalbans.gov.uk/Images/householders_guide_to_lawful_development_certificates_tcm15-2087.pdf

Insurance – you will need to inform your home insurance company that you now have a home office

Business Rateshttp://www.businesslink.gov.uk/bdotg/action/detail?itemId=1086066821&r.l1=1073858808&r.l2=1073859221&r.l3=1086066759&r.s=sc&type=RESOURCES

steve@bicknells.net

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