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Clearing up confusion over use of home costs

February 17, 2022

Many business people are confused about the use of home calculation.

Outside expenses

Apportion any costs incurred on the outside of the house between the business use and the non-business use on an area basis. So if you have 10 percent of your house used for business, you can claim 10 percent of costs like mending the roof.

Inside expenses

Any expenses not relating to the area used for business are not claimable. For example, if you carry out some maintenance work in the kitchen, which is not an area principally used for business, none of the cost is tax deductible. On the other hand, if maintenance work is carried out in the area where you work, it is fully tax deductible. If the expenditure relates to the whole house, it can be apportioned on a reasonable basis.

Area used for work

To be entitled to a claim for the use of your home, you have to have an area, which is a separately identifiable part of the house, which is used primarily for business purposes. So, if you work at the kitchen table and this area is used primarily for dining, you get no claim. However, if you use a corner of the dining room as an office, this share of the dining room could be a legitimate claim for use of  home.

Also, if you choose to work at home but could as easily do the work at your business premises, but it simply suits you to work at home, you don’t get a deduction. This is because, in this circumstance, working at home is merely a convenience and not a necessary expense in running your business.

How to do the calculation

You are entitled to work out actual costs and take a share of these. However, there is a shortcut. Inland Revenue will provide a per square metre rate to use to cover all the costs except for your mortgage interest and rates (or rent). So you can just apportion these two expenses and then use the Inland Revenue metre rate for the rest of your claim – power, depreciation, repairs and so on.

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