When working from home, small business owners will need to consider many things in their financial management plans. Blair Cadell specialise in advice on tax returns, payroll, bookkeeping and tax planning for personal tax payers, sole traders, partnerships, and limited companies.
According to recent study nearly 70% of employers believe the number of homeworkers will increase in the next five years. With many freelancers and small businesses already choosing to set up shop from home the traditional office space may soon become a thing of the past.
There are valuable tax breaks associated with homeworking that many home-run businesses are missing out on. Home-run businesses may legitimately claim tax relief on electricity, water, heating, cleaning costs and in some cases even house repairs. According to a recent report published by the Association of Chartered Accountants a surprisingly large number of homeworkers are not taking advantage of such tax relief.
A spokesperson for the ACCA said: "The worst thing that could happen in our current atmosphere of innovation is for some of those new, emerging businesses to struggle due to unwarranted tax bills. With so much to think about when running a business, tax deductions can get overlooked. It's worth doing your homework and getting sound advice to ensure you aren't paying more than you need to."
Head of taxation for the ACCA said: "The rise in start-ups from the home is good news for the economy, but whether these home-based entrepreneurs are aware that, for example, they can deduct tax for the electricity they use in the room where they do most of their work is another matter. Unless you are trawling through HM Revenue and Customs website, you may not know that even costs of hiring a cleaner can be deducted from your tax bill for the work they have done in the 'business room' of your home.
"It might not seem like much, but over the space of a year, all these costs for heat, light, even decorating expenses add up and could help a new, home run business at a time when available cash is at a premium.
"Of course, it is not always straightforward and it will not always be clear what can and cannot be allowed. Getting it wrong could land you in hot water with HMRC, so it's worth going over what is allowed and what isn't with a professional."
(image: Alicia Nijdam/FlickrCC)
Blair Cadell are a leading firm of Edinburgh solicitors, dealing in a wide range of property, business, tax and personal legal services. Call us free on 0800 515 626