Home-based businesses ‘must claim tax back’

Running a business from home is fast-becoming the preferred way of starting a small business, but tax experts warn that home-based entrepreneurs could be missing out on vital tax breaks.

The facts:

The Association of Chartered Certified Accountants (ACCA) says home business numbers have surged in the last few years because of developments in consumer technology, such as iPhones, Balckberries, and other forms of portable computing.

But it warns that home-based businesses must be aware of all the tax breaks for which they are eligible, potentially saving businesses thousands of pounds a year. The group put together the following list of tax breaks:

• The extra cost of gas and electricity to heat and light your work area.
• Business telephone calls.
• Use of a car – a percentage of tax relief is available based upon how much business use is incurred. In addition a percentage of the 20% capital allowances may also available on the vehicle, based upon the percentage of business use.
• Homeworkers may also be entitled to a deduction for items used for their business – either a capital allowance deduction for computer equipment or a straight forward deduction for some items such as stationary and paper.
• VAT is often overlooked but once your turnover exceeds or is expected to exceed £67,000 you must register.
• Note registration is based upon turnover and not profits.
• You can also make what is called a voluntary registration below this turnover level - be warned you will need to charge VAT on your invoices.
  

Also, there are other tax reliefs available for those who are an employee of a company, but have to work from home:

• A flat rate deduction of £3.00 per week (from 2008-09) for each week worked at home. This doesn't include the cost of business telephone calls.
• A larger amount if extra expenses are higher than £3.00 - but the taxman will have to see how these figures have been calculated.
  

They said:

Chas Roy-Chowdhury, head of taxation at ACCA, said: “It is important to claim all tax reliefs if you are running a business from your home, or if you are working as an employee at home.

“However small the relief payments may be, it is still important to claim them. That old adage of looking after the pennies and the pounds will look after themselves is certainly relevant in this case.”

We say:

For the smallest businesses and those starting up in 2009, tax reliefs are a vital source of ‘income’ at the end of the year. But you’ve got to claim to gain.

Home-based businesses in particular need to consider what they spend on the business for lighting, heating, phone and even furniture. Keep track of these, declare your expenses at the end of the year, and watch your tax bill drop.

Why not sign up to our small business newsletter and learn more?

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By News Desk  on   Feb 18,2009

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Keywords

starting a business    tax    tax breaks    home-based business   

Comments

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This is a very useful blog which I will link to my site. Fortunately I have a good accountant but in my experience many home business owners give little thought to tax matters - including paying income tax. Report Abuse

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