My client spends time working from home and wishes to claim a deduction against her trading profits for use of home expenses. I doubt whether the income tax savings will be significant and could easily be outweighed by future capital gains tax payable because of a loss of principal private residence relief (PPR).
What should she do?
Will the client loose PPR relief?
It is possible there is no capital gains tax problem to worry about. The legislation denies PPR PPR relief to that part of a gain which is attributable to any part of the house which has been used exclusively for business purposes. So, for example, a room which is occupied for business use during the working day but occupied for family and residential purposes in the evenings and at weekends will qualify in full for relief.
On the other hand, HMRC take the view that where the residential use is occasional and very minor then relief can be denied. They give the example of a doctor who keeps some private possessions in a room used as a surgery – the room will be treated as used exclusively for business purposes.
Would you like help and advice on this or any other tax issue?
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This tax Q&A was published in May 2017 – please be aware that the information above may have changed in subsequent months. This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.
(This content was originally produced by Croner Taxwise Limited and is reproduced with their permission)