Unfortunately I don’t think Labour’s record is much better as far as “The North” is concerned.
All the political parties have been quite happy to see the traditional industries of Northern England outsourced, offshored or scrapped.
Yes, personally I’d keep my head below the parapet in terms of declaring part of my home as a place of work.
The old apocryphal story about specs sent off to India that came back in COBOL not as required in PL/1
That doesn’t really make sense - there’s nothing about setting up a home office that increases the value of your home, in fact the usual advice if you have converted a bedroom is to convert it back for the sale.
I got some advice on this years ago from our tax advisors, KPMG, I can’t remember exactly why now, it may well have been because more and more people in my part of the business were working at least one day a week from home (I was always very flexible on that sort of thing) and we needed to ensure we weren’t getting them into a difficult tax position.
If I remember correctly, the view was that the part of the house that was your family home was exempt from CGT, but the part that was for business use was not. So, of you had a home office and it was 15% of the house you’d be liable for CGT on 15% of the gain on the overall property.
Now, fair to say KPMG would be on the side of the angels and most people probably wouldn’t give a hoot, but one wouldn’t want any comeback from employees that got a surprise later on
Why’s that John?
All the employees in our company work from home & are scattered all around France, except our director as he manages 6 other companies. We even had our lead IT dev tech living in a camping car for a year or two (not sure of the legalities of that though, safety at work etc).
If it was completely separate, especially if built as an extension to house an office - maybe.
But if you buy a 4 bedroom house, turn one of the bedrooms into a home office, then turn it back into a bedroom and sell a 4 bedroomed house I genuinely do not see that the interim use for work has any bearing on either the value or the CGT.
See above Wozza.
Now I have to say, my old firm was whiter than the driven snow on these matters. I presume all your dispersed employees are tax resident in France, because that’s another quagmire I had to deal with in the past. One can “waste” a lot of time and effort with tax advisors and HR trying to sort this stuff out, and my HR director was a superb, can do, sort of person, but even she hit the buffers once or twice when we tried to accommodate valued employees.
Thank goodness it’s all behind me Trying to get Apple Books to sync across all my devices is challenging enough for me now It’s to do with too many Apple Ids and you can’t consolidate the bloody things).
Mine not to reason why, mine just to take KPMG’s advice or die
Billy, I’ve sat in board meetings where our treasury guy showed charts of billions (not a typo) whizzing off to the Netherlands and then whizzing back again and then disappearing into the tax free ether. Was it all legal, I have no doubt it was, but we made sure that a partner from our auditors, PWC, and a partner from our tax advisors, KPMG, also presented to the Board and gave the transactions the thumbs up. I would have had exactly the same approach to any practice that I introduced which could have impacted an employee’s tax situation.
I guess it is the exact opposit to the Boris Johnson style of mamagement
There are lots of little considerations regarding a home office and tax. I’ve had offices at home for years in both the UK and France - and sold houses as both primary residence but with part liability to CGT and rental properties fully liable to CGT.
One thing to bear in mind is that during the life of a home office you are deducting the costs against income tax - so liability to proportional CGT might be viewed as fair.
But the over-riding consideration is that the CGT regime is really generous and very lightly policed (probably not at all now in the UK in view of the loss of staff and expertise from HMRC). There are many allowances, plus indexing, etc. Few people actually use their CGT allowance.
Hi John,
Maybe things have moved on the DRH and legal front. Yes, all live in France.
I’ve just had a look at my contract (cleverly worded)!
It’s straightforward, providing the room’s primary purpose is that it’s used for your job. This office was perfectly legit and was declared every year (never claimed anything for my assistant, bottom left).
I realise that I’m arguing logic & fairness vs HMRC rules - and in that battle logic and fairness come a dim and distant second place.
I don’t think the income tax allowances are anything to do with it.
A moment’s research suggests there is a kernel of truth to the CG thing but, as I said, it has to be an area of the house which is *exclusively* used for work. Any “shared use” would remove the liability to CG.
So, temporary use of a bedroom as a home office would not count, especially if turned back into a bedroom before sale.
I don’t think that’s correct Billy. If it was, everybody would turn the business part of the house back into use as part of the home before sale, and avoid CGT.
My experience is not as an employee using a room as a home office, but as a self-employed person (and later employed, but owner of the employing company). In these cases you have to choose either not to deduct your home office expenses from income or corporation tax, or to lose your residential CGT allowance on that part of the house. If you choose to deduct your home office expenses, you also choose CGT liability by default (apportioned for the period you claimed home office expenses, as well as the proportion of the total expenses you claimed).
All very logical - but the point is that almost everybody should claim the deductions against income/profit, because the CGT regime (in the UK) is more favourable (obviously - it’s for the rich - the poor never get to use their CGT allowance).
To give you some idea, although I can’t remember the figures for the office floor area, etc, on one of my houses I made about a £400,000 gain, but once the various allowances and indexing had been applied, and of course the personal CGT tax-free allowance, I paid no CGT.
I imagine they would be advised to do so, precisely to avoid CG, assuming that the space was originally part of the living accommodation of the house.
Certainly in the case of bedrooms used as home office space the advice from “house dressers” is clear - turn them back into a bedroom to appeal to potential buyers (subtly different reason but the advice is the same).
Frankly most won’t be aware of the potential CG liability anyway because the man on the Clapham omnibus doesn’t tangle with CG in their normal tax affairs and (if they do a tax return) will simply list it as “sale of primary residence” which is exempt.
Its been some time now (since we closed the business and moved to France) but our business was effectively run from home but in a separate barn in the grounds with it’s own planning permission.
I recall there were difficulties with the local planners who were reluctant to release the dual use but eventually, we did sell as a whole (at significantly more that the value we paid for the whole initially) but I don’t now actually remember any CGT elements coming in to play.
I’m sure our solicitors would have been on the mark with the transaction so perhaps I ought to keep quiet at this stage
A further thought on this.
The liability for CG arises at the point of sale, when the gain is actually realised, and not before.
So whether part of the sale falls outwith the primary residence exception depends on its status at the moment of sale, not before.
I would maintain (and would be prepared to argue the point with HMRC) that buying a 4 bed house, using one of the bedrooms during the day as a work from home office and for general family “computer room” activities (say, watching some movies, playing some games) in the evening then turning it back into a bedroom for viewings and sales - which is what most people do with a “home office” - would a) not be exclusively for business use and b) would not be a sale of a property part used exclusively for business.
Obviously the flip side is that if someone bought a house, built an extension to use solely for running a business, did not use that space in the evenings but mysteriously turned it into a games room just before selling, I possibly would not have much sympathy if HMRC decided they were trying to evade CGT.
Edit: and, of course the planning permission would have to be for business use, or there would have to be a planning application for part of the house to be used exclusively for business (as a change of use) - so rather more likely to flag up to HMRC.
And the grey area between these two scenarios is where the tax consultants and advisers lurk and ply their trade
Not in my experience. How long over the ownership period the property has been a principal primary residence also counted. I’ve even been (mildly) challenged over periods abroad.
Say I buy five properties (chance’d be a fine thing ) and hang on to them for twenty years and then sell them one at a time having declared it my PPR some short time before?
We’re drifting a bit from the bedroom used as home office scenario though aren’t we?
As I said in my last post - if it’s clear that the properties have been exclusively used for business, or have not been your primary residence and then you conveniently switch their status just before the sale HMRC might well give you a hard time.