• They can only “inspect” the areas of your home that are used for business.
• You can request they leave at any time but they will want to know your reasons for wanting this and also to arrange another visit. If you refuse this then it could lead to further questions and possible penalties ranging from £60 per day up to £3000.
• They have the right to “inspect” your premises, not “search”. Meaning that they can not specifically hunt for things to go against you. They can only look at the records they have requested, to check that all is in order.
• They have the right to look at business records but not to question/interview employees to find out more information.
• They can request information on the personal financial position of the proprietor/director of the business to check that their position is in line with the taxes being paid, but once again they cannot go “fishing” for extra information.
• As a general rule, they cannot remove documents from the premises without your agreement, they can only make copies or take extracts. But there are some documents that they do have the right to remove such as “legally privileged papers, tax advisors papers and appeal material”.  If they do remove anything from your property then you must make sure you get a full and detailed receipt of exactly what has been taken.

Though the HMRC can make unannounced visits, they usually provide you with either a phone call or letter seven days prior to their visit. In that notification they will state exactly when and where they will be visiting you, the name of the visiting officers and what documents they are coming to look at.

Once at your premises, they cannot demand to see extra documents that were not stated in the original notification. They would have to arrange another appointment for these. However if they find anything useful or unusual relating to another area in the documents they already have permission to view, then they can pass this information for further investigation.

The things they will usually be looking to review are things like your receipts, expenses of the business, sales and purchase records as well as possibly your PAYE and VAT files. They may also check equipment, raw materials and products produced. This is to make sure that all of these areas are relative to each other and that you are not claiming fraudulently. These inspections can take anywhere from a few hours to several days depending on the size of your business.

It is always a good idea to cooperate with the HMRC when they want to visit as though you can negotiate when and where the meeting will take place, you can never actually stop them from coming at all. And it is best to be prepared for them, than to have them make an unannounced visit which they would inevitably do if they are constantly turned away. You do have the right to refuse them entry but this could result in deeper investigations and if you have nothing to hide, then you have little to worry about.

Written by Becky Drummer-Jones

“travelling you had to do whilst doing your job”

 or the

“expenses you had to pay whilst doing your job and which related ONLY to doing your job”

There are also a few other factors that determine how much you can claim. Whether you are self employed or employed is one. How often you work from home is the second. And the third is whether or not you have a choice in working from home.

Self Employed

If you are self employed and work solely from home then you can claim back part of the costs for household bills such as water rates, gas and electricity as you are effectively using more energy in order to carry out your work. You could potentially even claim for a relief against your council tax, rent, home insurance and mortgage payments as these are also things that need to be paid in order for you to not only live in your home, but also work there. However, it is not beneficial for you to have a room dedicated solely to work, such as a home office that is private or out of bounds to the rest of the family. This is because it could cause problems further down the line regarding Capital Gains as your Only/Main Residence is now being used for work too. This usually reduces any gain to zero. It could also impact on your home insurance. It is therefore much better to simply have certain times that it is a “work zone” and other times for more recreational or family use.

If you are working mainly from home then the method to work out roughly what you should attempt to claim follows this simple formula:

 Total bills (water, electric, gas etc) ÷ number of rooms in the house = Amount A

Amount A x number of rooms used for work = Amount B

Amount B should be relative and in keeping with the type of business you run. As if you try to claim a little extra than normal, this will often be noticed by HMRC and in turn cause them to investigate. This is also the same situation if the second method of estimation is used. This option would be used if you work rarely or inconsistently from home. Common sense says that if you are only doing small amounts of paper work from home then far less energy will be used as opposed to if you were running the business solely from home. However this does not stop people slightly exaggerating their claims. There are no set limits or levels for particular trades but the main objective is to stay consistent and in line with your normal household bills and type of work.

The other way that you should be able to claim working from home is through fixed HMRC allowance. In the main the taxman will not ask questions if you claim these allowances. You will get a flat rate deduction of £3.00 per week (from 2008-09) for each week that you’ve got to work at home, this doesn’t include the cost of business telephone calls

Written by Becky Drummer-Jones

• incurred wholly and exclusively for business  (rental) purposes; and

• are not of a capital nature.

It is not possible to set out all the expenses that are allowable for tax purposes in all circumstances but some idea of the main types of expenses that are likely to arise in a rental business and also some idea of what can or cannot usually be claimed as a deduction in calculating rental business profits are covered in this post.

For an expense to qualify the business purpose must be the sole purpose. A non-business or private purpose prevents any deduction from business profits where there is no objective yardstick by which any business element can be distinguished from the non-business element.

Examples of deductible expenses include:

• Repairs and maintenance;

• Interest paid;

• Capital allowances;

• Wear and tear or renewals allowance;

• Travelling expenses;

• Legal and professional fees;

• Managing agent’s fees;

• Insurance;

• Rents and ground rents paid;

• Lighting, heating, cleaning, gardening, security, caretaking etc.;

• Advertising;

• Accountancy fees for preparing the accounts and agreeing taxation liabilities;

• Council tax, business rates and water rates – if paid by the landlord;

• Bad debts and the cost of pursuing debts;

• Staff costs, including statutory redundancy pay and training.

Repairs and maintenance

• Expenditure on repairs is deductible, including ordinary repairs and decorating before the building is first let;

• Expenditure is not deductible for the cost of alterations and improvements, or the cost of bringing a newly bought building into a fit state for letting. These are capital expenses;

• Expenditure reimbursed by insurance is not deductible.

Interest

Interest payable for the purpose of the property letting business can be deducted in the accounts. This includes interest on a loan to buy or improve the property or to fund repairs.

Travelling expenses

• Travelling expenses are allowed if they satisfy the ‘wholly and exclusively’ rule. For example, the costs of travelling, solely for the purpose of the business, are allowed between let properties, or to a let property from the place where the rental business is administered;

• Travelling expenses are not allowed if private purposes are included in the travel, such as personal shopping or family visits;

• Where the business is administered from the landlord’s home, the cost of travelling from there to the properties is unlikely to be allowed if the home is far away from the properties, as the need for the journey is considered to be dictated by the personal preference of the landlord to live in a particular place, rather than the needs of the property business.

Legal and professional fees

• Fees on the purchase of a property or for the first letting agreement are treated as capital expenses and are not tax-deductible, if they are for a period of more than a year;

• Fees for a letting agreement of less than a year, or for renewing a lease for less than 50 years, are deductible;

• Other professional fees, which are normally allowed, are those for insurance valuations, and for evicting an unsatisfactory tenant in order to re-let the property.

Income from property is affected by a large number of tax rules - the reasons for this are the variety of uses to which property can be put, and the different ways in which income and profits arising from property can be taxed. Substantial profits can be made on single transactions, making tax planning important. The large volume of tax legislation affecting property means that the precise way in which a transaction is structured can significantly affect the tax payable.

Please contact us to help you with your tax planning and for completing your tax returns.