Freelancers' Questions: how do I work at home with freelancers?

Freelancers’ Question: I am starting my own architectural design practice and will occasionally use freelance workers to assist with projects. Ultimately, I would like to convert my loft into a studio where freelancers can work with me. Can I set any of the expenses against tax?

Expert’s Answer: Many small businesses operate, at least in part, from the owner’s home. For tax purposes, it is possible to deduct a portion of costs such as council tax, water rates, insurance, mortgage interest, repairs and utility bills when calculating business profits.

The “appropriate proportion” will vary from case to case but should be based on a reasonable split between business and non-business use. If you have an area of your home set aside wholly for business, it might be possible to apportion a fixed expense by reference to the number of rooms or floor area.

If any rooms used for business purposes also have non-business use, then a further apportionment would be necessary.

Costs incurred converting your loft will not be allowed directly against your profits because this will count as capital spending.

You should also bear in mind that if you do not set aside an area solely for business use, the exemption on capital gains tax, currently standing at 18%, on your main home many be restricted.


The expert was Jon Sutcliffe, a partner at Kingston Smith, the accountancy firm.

 

18th November 2009

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