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Limited Company owner claiming use of home

8th August 2012

As stated in the general “use of home” blog, the rules governing what can be claimed for limited companies are stricter than those for sole traders. Imagine that you are the director and sole employee of a limited company. In order to claim anything, you must carry out ‘substantive duties of employment’ (EIM32760) from your home without the opportunity to perform those duties elsewhere, such as at a client’s site. If this is possible, and you choose to work from home, it doesn’t count (EIM32800).

Why so strict?

This is because, since you are considered an employee of the limited company, any expenses you claim must be those incurred ‘wholly, exclusively and necessarily’in the performance of duties of employment. Therefore, since it is not necessary for you to work from home, it does not fulfil the condition imposed.

A very specific example

For example, Sarah runs a limited company that manufactures robotics parts for companies. To do this she requires very specific tools and equipment, which she keeps and works in a workshop in her house. Since the equipment is large, it would be unfeasible for her to work on site at her clients, so she can claim money on her home expenses, pro-rated as before, since it is ‘necessary’ for her to work there.

When you can’t claim

Suppose that instead of robotics parts, Sarah designs and builds websites for companies. Since it is possible for her to perform the work at the companies premises (she essentially has a choice where to work) the ‘necessary‘ clause is not fulfilled, so she could not claim any of her home costs for work she does at home.