Home and car – tax implications.......??

As an owner of a small business you will typically have your own car and run your business from home. If that is you then you need to consider the following:

Home office

If you run your business from home, a proportion of the expenses of your home can be deducted from your taxable profits on your self-assessment tax return.

Provided a room or space is for the business, it is usual to calculate the proportion of the house occupied by the business and charge the appropriate percentage of council tax, heating and lighting and so on, to the business. If a shared telephone is used, a proportion of the bill can be charged to the business too. HMRC do have some guidelines on this based around different scenarios so please have a look www.hmrc.gov.uk/manuals/bimmanual/bim47825.htm

But Beware of CGT

If you use a proportion method (rather than a flat rate) and you sell the property at some future point HM Revenue and Customs might take the view that the area used as an office should be disallowed from the exemption for capital gains tax (CGT). That means part of any profit on the sale of the house is subject to CGT.

Now to your car.....

If a car is used in the business, a proportion of the cost of running a car – petrol, repairs, servicing and so on - might be allowable as well as a 25 per cent writing down allowance.

Alternatively you can charge 40p per mile (up to 10,000 miles) for business mileage. To claim car expenses against your business profits you need to keep a record of mileage to justify the claim. Other items might be eligible as deductions in your self-assessment tax return if they appear to meet the “wholly and exclusively used in the business” test.

If you would like further details about how to treat your home office or your car in your accounts then please call Richard Dare on 0845 2576835