Written by If you Work From Home, either as a self employed person or as an worker, then you may possibly be considering what tax breaks might be accessible to you because you are making business use of some of your personal assets in the operation of the Organisation . An Internet Business for example might be operated from home taking up an isolated room which must have heating and lighting. Also computers and any other office equipment such as photocopiers or printers and fax machines are using up your personal electricity. Most online jobs demand the same amount of operating costs when run from home so it is enticing to consider assessing all these costs, which would not have arisen if you did not Work From Home, amalgamate them together as business expenses and try to claim them as allowable against tax. It is a very reasonable argument that you should not have to pay such expenses out of taxed income and indeed most accountants would agree with this outlook. Your internet business, any online jobs you have, or any other work from home situations should not be paid for out of your own wallet, particularly after you have paid tax in the first place.
But be cautious how far you take this. For example you may be tempted to add to this list of expenses a percentage of your council tax bill. Picture you need an whole different room to enable you to work from home, a room dedicated to your Internet Business or Online Jobs. This room is used for nothing else so you can logically argue that if you didn’t work from home, you wouldn’t need this extra room and so your home could be reduced and your council tax bill thereby lessened. You could argue that your business ought to therefore foot the bill for a section of the council tax bill and that this should be allowable against tax on profits made from your business. You could determine the amount of council tax reclaim as the amount of the floor area of your Work From Home room to the total floor area of your house. Let’s say that amounts to 10%, you could argue that 10% of your council tax bill is directly attributable to your business and therefore us a business expense allowable against profit. This might very well be agreeable but the danger lies in the future.
Presume that you had claimed as above for a number of years, regularly setting off that 10% and reducing your tax bill accordingly. Then one day you sell your house and you realise a very large profit. (If you own a house for an amount of years then you almost surely will). In the normal way of things any profit made from the appreciation of a property that has been used just for residential purposes is tax free. But if the property has been to some extent of the profit made on the transaction is due to your business, rather than you as an person, and therefore income tax should be paid on that portion. The fact that you had regularly made claims for council tax would be decent evidence to support any such claim by the revenue and the net effect could be a huge and unavoidable tax liability far greater than the savings you made over the years.
