Q: Are there any tax incentives to run a business from home?
Gill from Wigan asks:

Are there any tax incentives to run a business from home?
Emma Jones, Business woman, author and editor, replies:
Hi Gill
There are many incentives to run a business from home! If you’re already doing so, you’ll be feeling the benefits of low overheads and no commute. But yes, on top of that and in answer to your question, there are some tax benefits too. The biggest one is related to the expenses you can claim when running your business from home. The simplest way to carry out the calculation is to add up the annual costs (as applicable) of:
- Gas / electric / solid fuel
- Council Tax
- Contents / buildings insurance
- Water rates
Next, simply count up the number of principal rooms in the house (kitchen, reception rooms, bedrooms, bathroom etc). If there are seven, and one is used for half business, half personal (eg spare bedroom / office) then half of one seventh of these expenses are allowed and can be claimed against your tax bill. You can also claim for the business element of telephone bills and business travel.
Other planning you can do, is issue a number of shares to your spouse or partner so they are able to receive part of a dividend paid for the year, and you can claim their personal allowance. Also, did you know that paying your children to work in the business is a way to reduce tax? As long as your children are over 13 and perform appropriate tasks within the business for a sensible salary, there is nothing to stop you paying them for work done to reduce your business tax liability.
We have many features on this topic at www.enterprisenation.com so I hope you’ll visit to take a look. It would be well worth your time - and will cut your tax bill!
Emma Jones is founder of Enterprise Nation the home business website, and author of Spare Room Start Up - how to start a business from home.
John Lamb, editor of Ability magazine, replies:

I have a home office and there are no tax incentives to encourage people to work from home; rather the opposite. Local authorities don’t want people carrying out businesses from residential properties that might disturb the neighbours or cost them lucrative business rates. However, you can claim a proportion of your home heating, lighting, maintenance and rent or mortgage against business expenses (your accountant will work that out for you).
John Lamb is the editor of Ability magazine, a campaigning publication for people who have difficulty using IT.

There are no special tax incentives of running a business from home. However, expenses incurred wholly and exclusively for the purposes of the business should be deductible in calculating the taxable profits of the business - either as revenue expenses (for example, heating, telephone, lighting) or under the capital allowances system (for example, in respect of computers, furniture and other qualifying plant and equipment). In many instances, the “wholly and exclusively” rule may not be satisfied and the local inspector may agree to an apportionment on a just and reasonable basis for the purposes of determining the amount of tax relief available.
One trap to be careful of is the restriction which could apply to the principal private residence exemption. The exemption is available under the capital gains tax regime in respect of gains arising from the disposal of a principal private residence - the gain normally is free of tax. However, if any part of the house is used exclusively for business purposes, then the capital gains tax exemption may be limited. So ensure that no space is used exclusively for the purposes of the business, and substantive private use is made of the space from which the business is run.
Vishvas Kanji is a Tax Consultant for Mishcon de Reya Solicitors. You can find out more about his services here.
Disclaimer: The opinions expressed are those of the author(s) and are not held by PRIME unless specifically stated. The material is for general information only and does not constitute legal, accounting, tax or other personalised advice. You should not rely on this information to make (or refrain from making) any decisions. It is not a substitute for independent, professional advice for your own particular situation.
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Posted on Friday, May 15th, 2009
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Are some of your customers stars, bringing in money, skills and enhancing the reputation to your business? And are others quite frankly duds, bringing you hassle and actually losing you money on each sale?
6. Next the important bit - the fiddle factors. We all know some clients are reliable and easy to deal with, while others are a pain. So think of a fair monetary value in pounds per quarter for the joy (add) or pain (subtract), and apply this hassle factor to the value score.
7. We also need to recognise that some clients are valuable for strategic reasons - perhaps referring business to us, allowing us to build up valuable expertise or taking us in the direction we want the business to go. So we need another fiddle factor to recognise this strategic value. Again add an appropriate positive amount in pounds to any client taking you in an exceptionally useful direction, subtract money from clients who lock you into dead-end work you’d rather avoid and leave average clients alone. This gives the overall “value” of the client to you.