"eWorking" expenses

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flibber

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I'm an IT contractor and I'm a director of my ltd. company. The business is registered to my parents house but I'm currently living in a different residence, renting from a landlord. I do all my work for a managed services company which has different clients and I work from home for the majority of the time (I could technically work on-site at the client instead but there's very limited resources available there and reduces productivity).

I'm currently sorting out my accounts and I've been researching a bit about home office expenses & I came across this today: it's the IT69 leaflet (can't link URLs yet). Am I eligible for this allowance? I've also heard things like expensing 1/6th (or 1/3rd) of esb/gas bills is allowed but then this might have CGT implications and loss of PPR benefit? From my reading of the leaflet, any legitimate costs, including a portion of ESB, arising from eWorking would be ok.

I was also wondering that would expense claims like the above be affected if my lease that says you can't run a business from the dwelling (I wouldn't think so but from reading these forums it seems a bit ambiguous)? I'm not going to claim any of my personal rent as a business expense.

I'll be getting all this checked out by an accountant but I want to get an idea about it before I go.
 
Hi Flibber, not an accountant, but in a similar situation.
Your home office expenses - light & heat, phone & broadband etc can legitimately be claimed as a business expense. If you were to claim rent (which you are not) and other services such as cleaning, bins, water then you would have to pay rates as well. However, if you have no office expenses other than a reasonable light & heat and phone & broadband, you are in pretty clear territory.

Any lease that says that you can't run a business from the dwelling refers to a) having a business registered at that address and b) having customers/suppliers/employees visiting/working from the premises (primarily). If it is just you, working from home and you do not require public liability insurance, then nobody needs to know if you are "running a business" or just "working from home"...

Hope that makes sense.
D
 
Cheers for that Daisy! Do you know if the eWorking allowance is applicable in my case? Say if I work 21 days a month, that's 67e in eworking allowance. If my % light/heat & bb/mobile is less than this (which can be the case), can I claim for the 67e instead? I know it's a bit cheeky!
 
flibber, whatever you do, once you start claiming the allowance you must stick with it. You can't chop and change when its more beneficial.
 
Daisy2012 said:
If you were to claim rent (which you are not) and other services such as cleaning, bins, water then you would have to pay rates as well.
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Just on this point, I don't know where you heard this but it isn't true. Your tax return is confidential between yourself and Revenue and has no relevance to the local council or other rates authority.
 
@ Flibber - as you are an employee but proprietary director of your own company you will be paying a couple of different taxes.

1. Your company will pay tax @ 12.5% on any profits it makes. The profit (loss) will be calculated based on your incomings (fees you are paid) and your outgoings (things the company spends money on to enable you to make money). You would include the costs of light & heat, phone and broadband as outgoings to balance against the income.
2. You will personally pay tax on your salary which is paid to you by the company. The company could decide to pay you an e-working allowance which the company then does not have to tax you on. However, revenue and/or your accountant might take a dim view of that! They might also take the view that since your corporation tax will be lower than your income tax you might all be better off with you claiming the allowance from the company... The accountant really will be the best person to discuss this with.

@ T McGibney - yes, your tax return is confidential, but this will not be just his private tax return. This is a ltd company and the accounts have to be published (just P & L and B/S it's true). The local authority may never get to hear about it, but technically if he wants to be tax compliant he would have declare a part of his residence as a business premises if he is also charging his company rent.
 
Yes, my plan is to basically take everything I make in sales of services out as salary + expenses, paying whatever paye tax & levies due on this, resulting in a zero corp tax bill.

2. You will personally pay tax on your salary which is paid to you by the company.
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What do you mean personally pay tax? I plan for the company to pay my salary after deducting expenses & tax via P30/P35. Are you saying I should be paying myself gross salary and then file expenses due and PAYE owed on Form 11 instead? I have no additional income other than my PAYE income from the company.

Re: the rent thing - I'm not gonna expense rent as I don't want to have to worry about the ins and outs of this, especially since im leasing it as a residential property from a third party.
 
Even though the company hands over the tax to the revenue, you are paying income tax personally... not that you have to file a separate return.
If no other income than no need for a form 11 unless they ask for one. And I think you're absolutely right not to claim rent, it can complicate things no end.

Good luck!
 
Daisy2012 said:
@ T McGibney - yes, your tax return is confidential, but this will not be just his private tax return. This is a ltd company and the accounts have to be published (just P & L and B/S it's true). The local authority may never get to hear about it, but technically if he wants to be tax compliant he would have declare a part of his residence as a business premises if he is also charging his company rent.
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The Profit & Loss account does not have to be included in the abridged accounts to be filed with the CRO by a company, in order to comply with the 1986 Companies Act.

Rates charges have nothing whatsoever to do with tax compliance.

Why should he charge his company rent? This makes zero sense to me.
 
Daisy2012 said:
If no other income than no need for a form 11 unless they ask for one. end.
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Sorry, this is again incorrect. Directors who own 15% or more in a company are obliged to file an annual Form 11 self-assessment tax return and can face serious penalties for failing to do so.
 
Stand corrected on the P&L in the abridged accounts and the form 11, thanks for the clarification.

On why charge the company rent - many people do this on the same basis that they claim light & heat as a legitimate business expense. I don't, because I would have to declare part of my home as a business premises and therefore pay rates. It would also have implications for the mortgage. Rates are a local property tax and therefore non-payment of rates leads to not being fully tax compliant.
 
Daisy2012 said:
On why charge the company rent - many people do this on the same basis that they claim light & heat as a legitimate business expense.
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They may do but it still doesn't make sense for a home-office business company. If your company pays rent to you, it is taxable in your hands. Much simpler and easier to pay salary instead.

Daisy2012 said:
Rates are a local property tax and therefore non-payment of rates leads to not being fully tax compliant.
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Why then are rates not taken into account for the purposes of determining eligibility for tax clearance certificates?
 
In my case the rent doesn't go to me, but to my landlord. I could submit as a business expense a proportion of my personal rent since it could be argued it's a home office expense, in the same vein as esb/gas/eworker allowance. I'm not sure on the legality of this, especially with the residential only clause in my lease. I have seen CGT & PPR mentioned but don't really understand it.

WRT Form 11 - I didn't submit this yet for 09 as I was told before that I didn't have to do it (I didn't get a form 11 posted out, I just submitted zero when I got my pay and file reminder on the payslip thing). The company was only registered for 1 month in 09. It was trading but I did not pay myself any salary for 09. My only income was from a regular PAYE job which I quit before starting the company. I've already paid tax on this income on a monthly basis while I was working. I wasn't registered as an employee of the company til a few months into 2010. Am I gonna get hit for a 10% surcharge on this paid PAYE when I file the return? I actually overpaid PAYE for 09 due to unclaimed monthly tax credits and being taxed prematurely at the high rate. Will I still be able to claim this overpayment back?
 
They're not taken into account because they are collected by another authority than revenue. They ought to be, if we had a joined up local/national system - but regardless, if local taxes are not paid up a company is not tax compliant, even if it is cleared by revenue with a tcc.

@ Flibber - you should contact revenue and get a balancing statement done on your personal tax for the tax year 2009 - probably by completing a form 11 (I await T McGibneys sage words on this - bound to be a better way). Your personal income tax return for the year ended 31 December 2010 is not finally due until 31 October 2011, but if your company was paying you a salary in the tax year 2010, it ought to have been deducting tax, prsi and income levy from you and returning these to Revenue. You also ought to have received a P60 by the middle of feb (or thereabouts) showing the amount of earned income, tax and income levy paid.

Stongly advise you to talk with your accountant sooner rather than later.
 
flibber said:
WRT Form 11 - I didn't submit this yet for 09 as I was told before that I didn't have to do it (I didn't get a form 11 posted out, I just submitted zero when I got my pay and file reminder on the payslip thing). The company was only registered for 1 month in 09. It was trading but I did not pay myself any salary for 09. My only income was from a regular PAYE job which I quit before starting the company. I've already paid tax on this income on a monthly basis while I was working. I wasn't registered as an employee of the company til a few months into 2010. Am I gonna get hit for a 10% surcharge on this paid PAYE when I file the return? I actually overpaid PAYE for 09 due to unclaimed monthly tax credits and being taxed prematurely at the high rate. Will I still be able to claim this overpayment back?
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I'm afraid that you may now be liable to pay a 10% late filing surcharge on your entire income for 2009 (including PAYE from your job) if you were a director with a 15%+ shareholding in your company in 2009 and failed to file a 2009 Form 11 tax return by 31/10/10. See [broken link removed] for more detail on this (exceptionally harsh) rule.

Daisy2012 said:
Stongly advise you to talk with your accountant sooner rather than later.
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+1
 
Doh I was afraid of that, bad timing to start the company :( Will see if I can plead with puppy dog eyes when the time comes.

Thanks for all the help guys!
 
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