Question about business expenses

J

jmurphy

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I run a small online IT business and for that reason, I need a home office, internet, electricity, etc. I decided to rent a bigger place (one bedroom) and use it as my home office. I'm single and the only reason I rented the bigger apartment was to have a home office (i.e I could rent a shared room for 600 per month but I ended up renting an apartment for 1200 per month)

My question is, what percentage of the rent/internet/etc is allowed to be deducted as expense? I understand it could be a difficult problem to solve but I would like to have an idea of allowable expenses.
 
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Your post is not very clear.

Are you saying that you rent an apartment for €1,200 and that you live there and run your business from there.

If that is the case you can claim part of the costs rent/electricity/internet as a tax deductable business expense. Establishing what part of the total expenses is deductable is not straightforward. If you look at each item in turn is there some objective basis for allocating between business and living. Is there a separate room which is in use for the business as an office or store. If so then you could use that fraction (i.e. one room out of say four) as a basis. You could probably use the same fraction for heat/electricity.
 
cremeegg said:
Your post is not very clear.

Are you saying that you rent an apartment for €1,200 and that you live there and run your business from there.

If that is the case you can claim part of the costs rent/electricity/internet as a tax deductable business expense. Establishing what part of the total expenses is deductable is not straightforward. If you look at each item in turn is there some objective basis for allocating between business and living. Is there a separate room which is in use for the business as an office or store. If so then you could use that fraction (i.e. one room out of say four) as a basis. You could probably use the same fraction for heat/electricity.
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Yeah, I rented a 1-bed room apartment and used the living room to setup my desk, printer, etc. Basically, I used the bedroom for myself and the living room for the home office.

Do you think I can expense something around 600 per month for the home office considering I have used the living room as the home office? Again, I'm single, no family etc. and I basically used the apartment for myself and to run the business.
 
50% seems very high to me. I know you are comparing to the smaller apartment that you could have rented if you did not have the business, but that is hardly relevant for tax purposes.
 
cremeegg said:
50% seems very high to me. I know you are comparing to the smaller apartment that you could have rented if you did not have the business, but that is hardly relevant for tax purposes.
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I see. do you have any idea what would be a reasonable percentage based on what I explained? Again, I really rented the place just to have a home office and meeting room.
 
Does your landlord know you are using a residential premises for commercial purposes? Does the landlord's insurance company or your insurance cover you to see clients in the property? Do the letting agent and /or management team know? What provisions have you made for increased footfall or parking requirements?
 
mathepac said:
Does your landlord know you are using a residential premises for commercial purposes? Does the landlord's insurance company or your insurance cover you to see clients in the property? Do the letting agent and /or management team know? What provisions have you made for increased footfall or parking requirements?
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OP has described their business as a small ONLINE IT business.

I expect their activities are indistinguishable from any of the tens or hundreds of thousands of tenants in the country who have been WFH throughout Covid. Are they all goosed, or is there a particular distinction between a self employed person WFH versus an employee?
 
jmurphy said:
just to have a home office and meeting room.
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Right there for starters - clients in and out of the property and parking outside, deliveries arriving, etc.

The differences between an employee working from home on a laptop / phone and a business owner using someone else's residential property as a registered commercial business address is a very long and complex list. Doing so without informing the owner and/or seeking his permission raises the improper use of the apartment to a whole other level of complexity.

"I pay my rent on time, so I can do what I like in here what I wish" seems to surface as a common attitude to rented residential property, but that doesn't make it right. The whataboutery defence seldom seems to works in legal wrangles either.

I wish the OP well in his/her endeavours but I'd strongly encourage him to make alternative arrangements, like renting a small commercial space.
 
mathepac said:
Right there for starters - clients in and out of the property and parking outside, deliveries arriving, etc.

The differences between an employee working from home on a laptop / phone and a business owner using someone else's residential property as a registered commercial business address is a very long and complex list. Doing so without informing the owner and/or seeking his permission raises the improper use of the apartment to a whole other level of complexity.

"I pay my rent on time, so I can do what I like in here what I wish" seems to surface as a common attitude to rented residential property, but that doesn't make it right. The whataboutery defence seldom seems to works in legal wrangles either.

I wish the OP well in his/her endeavours but I'd strongly encourage him to make alternative arrangements, like renting a small commercial space.
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Thank you. I see your point and it makes sense. By having a "meeting room" I basically meant online meetings. I have never had any clients vising the apartment or having any sort of meetings in my home office. But I understand your reasoning and thanks for pointing that out.
 
I've no idea what the tax rules/deductions are on home businesses these days but when I started, one room and used the garage for storage, the best thing I did was talk to a tax consultant. It seemed like a bit of an expense, especially when only starting out, but it paid off in the long run. The first year or twos deductions helped cover the consultant and in year 3 I started doing my own returns - so much easier online now.
My consultant told me if it's a legitimate business expense then it's deductible. So, for example, if you can say that 8 hours a day you're working from home then that's a third of a day so you could say that a third of the bills, heating, electricty etc., would be deductible. However, it might then be argued that you're only working from one room so any other rooms would not be deductible so in a 3 bed house you'd be at a third of a third if you get me. The same calculations could applied to other bills such as phone and then of course wear and tear on business items such as computers and the list goes on.
I'm back to 'talk to a consultant' and get everything sorted properly.
 
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