Sole Trader with home office

artisanobscure

Hi all,

Can anyone please help?
Tried this in the taxation forum but it was the wrong one, hopefully it is better housed here.

I'm a new sole trader who works from home. (Designer/Editor) I'm in a busy house share currently so I'm looking to go it alone soon to rent a city centre apartment. I'm trying to work out what I can afford... to do this I need to know what percentage of rent I can deduct for a home office.

My working week varies as I can have a week without a single project or I can have a very busy week! I'm probably averaging 30 hours a week of actual work. I freelance for a production company so I spend an hour or so of that at the clients office collecting assets. I'm hoping to get up to averaging 40 hours a week as my client list grows... I work from home using a desktop computer and laptop.

These are my options:

I'm curious to know approximately what I can claim in rent expenses before I choose an apartment and i'm finding it hard to find an answer that explains it simply.

For example, If I rent a 1 bedroom apartment for approx 800 euros and set up my office in a corner of the living room or bedroom (probably taking up a third of the room as i'd imagine the apartment rooms won't be very big) what would I be eligible to claim in this scenario?

Likewise if I decide to pay that little bit extra to try find a 2 bed apartment for maybe 900 euro so that I can use the second room as a dedicated office, what would I be eligible to deduct?

I'm new to all this and rather confused I admit! I literally can't find anything online to give me a clear breakdown of hows its worked out with regards to percentages and floorspace..

Likewise with electricity and internet, the internet will be for work purposes.

I can't afford an accountant just yet but will ring around tomorrow to see if I can get info in the tax office etc. Just wondering if anyone knows as its hindering my house search :-)

Thanks

Jack Kyle

You would apportion on a reasonable basis which in this case would be square footage.

Say you rent a 750 sq foot apartment with a 2nd bedroom that's 150 sq foot for €1,000.

You'd claim a deduction for 20% of the rent (i.e. €200) in your sole trader business account. You might also claim 20% of the electricity.

artisanobscure

Hi Jack,

Thanks for taking the time to reply!
I don't have a business bank account but I am a registered sole trader. I'm very new to all this so I'm just starting to make sense of what needs to be done. At the time when I registered the person I spoke with said I didn't have to have an actual 'business bank account' so I lodge cheques into a separate account in my own name to help me distinguish monies I get from invoices separately if that makes sense...

I've been looking at a 1 bedroom for 850 euro as I'm not sure I can afford the luxury of a separate office in a 2 bed (One day hopefully)

It has a one nice but compact bedroom which wouldn't fit my desk judging by photos so I guess my office would be in the corner of my living room if I get the place.

So I find out the floorspace of the entire flat including kitchen & bathroom and then deduct whatever percentage area of the flat entirety the desk and chair take up?

Tres confused. Uber kind of you to reply:-)



Thanks a million

Jack Kyle

artisanobscure wrote: »

Hi Jack,

Thanks for taking the time to reply!
I don't have a business bank account but I am a registered sole trader. I'm very new to all this so I'm just starting to make sense of what needs to be done. At the time when I registered the person I spoke with said I didn't have to have an actual 'business bank account' so I lodge cheques into a separate account in my own name to help me distinguish monies I get from invoices separately if that makes sense...

I've been looking at a 1 bedroom for 850 euro as I'm not sure I can afford the luxury of a separate office in a 2 bed (One day hopefully)

It has a one nice but compact bedroom which wouldn't fit my desk judging by photos so I guess my office would be in the corner of my living room if I get the place.

So I find out the floorspace of the entire flat including kitchen & bathroom and then deduct whatever percentage area of the flat entirety the desk and chair take up?

Tres confused. Uber kind of you to reply:-)



Thanks a million

No worries.

Yep - Just apportion based on floor area.

Be mindful of the €37.5k threshold for VAT registration too.

And yes you don't have to operate a separate bank account but doing so definitely makes things easier to keep track of.

Best of luck.

lakill Farm

artisanobscure wrote: »

Hi all,

Can anyone please help?
Tried this in the taxation forum but it was the wrong one, hopefully it is better housed here.

I'm a new sole trader who works from home. (Designer/Editor) I'm in a busy house share currently so I'm looking to go it alone soon to rent a city centre apartment. I'm trying to work out what I can afford... to do this I need to know what percentage of rent I can deduct for a home office.

My working week varies as I can have a week without a single project or I can have a very busy week! I'm probably averaging 30 hours a week of actual work. I freelance for a production company so I spend an hour or so of that at the clients office collecting assets. I'm hoping to get up to averaging 40 hours a week as my client list grows... I work from home using a desktop computer and laptop.

These are my options:

I'm curious to know approximately what I can claim in rent expenses before I choose an apartment and i'm finding it hard to find an answer that explains it simply.

For example, If I rent a 1 bedroom apartment for approx 800 euros and set up my office in a corner of the living room or bedroom (probably taking up a third of the room as i'd imagine the apartment rooms won't be very big) what would I be eligible to claim in this scenario?

Likewise if I decide to pay that little bit extra to try find a 2 bed apartment for maybe 900 euro so that I can use the second room as a dedicated office, what would I be eligible to deduct?

I'm new to all this and rather confused I admit! I literally can't find anything online to give me a clear breakdown of hows its worked out with regards to percentages and floorspace..

Likewise with electricity and internet, the internet will be for work purposes.

I can't afford an accountant just yet but will ring around tomorrow to see if I can get info in the tax office etc. Just wondering if anyone knows as its hindering my house search :-)

Thanks

ESB - 33/50%
Landline and Broadband - 33/50%
Heating -33/50%
Same with the yearly management fees if you the client have to pay, but normally the landlord pays.

I think for €350/€500 a year an accountant should save you that in tax and is a business expense anyway. Also probably less likely to be flagged for investigations with revenue.

dbran

Hi

The revenue are cracking down heavily on this area. Where will the work be done normally? What work will be done at home? If the work is normally done mainly at the clients premises then there may be no deductions allowable. The fact that your decision is based on the deductability of the rent worries me slightly.

Regards

dbran

pog it

Also considering to set up as sole trader and had no idea about this.

Is this deductable from what you would owe revenue by end of year?

Jack Kyle

pog it wrote: »

Also considering to set up as sole trader and had no idea about this.

Is this deductable from what you would owe revenue by end of year?

No, it's a trading deduction.

You include it with other trading expenses and subtract them from your sales/turnover.

You're then subject to tax on the surplus.

Vince1974

Interesting topic, does anyone have any solid references to a link on revenue.ie or the like?

Obviously if the business hangs on whether you can subtract (part of) rent that would be worrying, but if you're working as a sole trader from home anyway, it might be a nice little bonus.

JuniorB

My accountant told me a while back that you cannot run an 'office' from a one bedroom apartment. If you have a 2 bed then you can use the 2nd bedroom as an office and apportion the relevant expense.
If in a one bedroom with a living room, kitchen etc you would have this expense whether you worked from there or not so cannot claim the rent.

http://www.revenue.ie/en/business/running/allowable-expenses.html

Vince1974

The link you just sent seems to contradict what you're saying:

Where expenditure relates to both business and private use, only that part which relates to your business will be allowed. Examples of such expenditure are rent, electricity, telephone charges etc., where the premises involved is used partly for business and partly for private purposes. These expenses will need to be apportioned to exclude the private use.

In the example of a 1 bed apartment, if someone uses the living room to work from, it sounds like they'd be entitled to apportion the cost of running the house (rent/mortgage interest/utility bills) and subtract this from their gross income as a sole trader.

For example:
Electricity/gas/oil/water(?): 1200/y
Mortgage interest: 5000/y
Internet/Phone: 1200/y
Total annual expense: 7400

Living room space: 35 m2
Floor space of apartment: 70 m2
Working 60 hours per week
Total hours in a week: 168
Apportioned to business only: working hours/total hours in week * floor space of 'office space'/total floor space of apartment = 60/168 * 35/70 = 0.17857 = 17.86%

Deductible for the year: 7400 * 17.86% = 1321.64

Doesn't sound unreasonable does it?