Splitting home office internet bill for VAT

St1mpMeister

I have a home office and currently factor my internet as a 25% business cost (75% personal cost), based on how I was splitting the electricity/gas bill as a 25% business cost, but I realised that I actually use the internet 75% of the time for business-related usage, and roughly 1 hour in the evenings for private usage. My business is web-related.

I was thinking of increasing this to 75% business / 25% personal (so claim 75% of the internet bill as a business expense), but a colleague mentioned that his accountant suggested a maximum split would be 60% business (though 50% would be recommended).

I've asked him to send me on a link to where this is detailed, but in the meantime thought I'd check here if anyone has a link or details where this 60% limit is mentioned?

I couldn't find anything on Google.

barneystinson

St1mpMeister wrote: »

I have a home office and currently factor my internet as a 25% business cost (75% personal cost), based on how I was splitting the electricity/gas bill as a 25% business cost, but I realised that I actually use the internet 75% of the time for business-related usage, and roughly 1 hour in the evenings for private usage. My business is web-related.

I was thinking of increasing this to 75% business / 25% personal (so claim 75% of the internet bill as a business expense), but a colleague mentioned that his accountant suggested a maximum split would be 60% business (though 50% would be recommended).

I've asked him to send me on a link to where this is detailed, but in the meantime thought I'd check here if anyone has a link or details where this 60% limit is mentioned?

I couldn't find anything on Google.

One question you could ask yourself is, what would your BB cost / package be if you weren't using it for business? Arguably only the incremental cost attributable to whatever package you have, represents a business expense... (just playing devil's advocate!)

The_Chap

problem you will find is there is nothing detailed, it is down to the discretion of a Revenue official at time of an audit.

My business partner was recently (last year) audited for his last 5 years accounts and they deemed that 30% was the maximum he could claim, landing him with a hefty tax bill, no option to negotiate even though he had a 2nd dedicated business line as part of his overall package.

barneystinson

I don't know how a person can have "no option to negotiate", there's ample due process - complaints & review procedures, and the Tax appeals system, if a person is being told they owe tax that they don't agree is due...

srsly78

Why was he even claiming as percentage? A seperate dedicated business line is 100% expensable. It's only when you mix in personal use that things become complicated.

Or was it the case that the seperate line was still part of the personal package? Should have gotten a seperate business account.

The_Chap

barneystinson wrote: »

I don't know how a person can have "no option to negotiate", there's ample due process - complaints & review procedures, and the Tax appeals system, if a person is being told they owe tax that they don't agree is due...

I'm sure all the due process options would have been open after the event, I mean they weren't prepared to negotiate while they were on site, and even then they're advice was they never allow above 30%

srsly78 wrote: »

Why was he even claiming as percentage? A seperate dedicated business line is 100% expensable. It's only when you mix in personal use that things become complicated.

Or was it the case that the seperate line was still part of the personal package? Should have gotten a seperate business account.

Overall Eir package included the second line which he was using (as well as broadband) he has since gone down the route of completely separate line, despite the process of getting this installed being overly complicated by Eir! (different rant)

St1mpMeister

The_Chap wrote: »

problem you will find is there is nothing detailed, it is down to the discretion of a Revenue official at time of an audit.

Would 30% be the norm? My colleague's accountant said 50% would be regarded as "safe" in avoiding issues during an audit (for a web-development business)... although specified 60% as a "limit"

srsly78

There is no norm or limit. Claiming personal stuff as business expense is illegal.

If it's just small amounts noone really cares, it's not worth auditing. As the amounts get larger this changes.

It's better to do things the other way around, like with a business mobile phone say. Business pays for this 100% but some incidental personal use may be allowed.

The_Chap

St1mpMeister wrote: »

Would 30% be the norm? My colleague's accountant said 50% would be regarded as "safe" in avoiding issues during an audit (for a web-development business)... although specified 60% as a "limit"

That’s all I can say in our experience of an actual audit, others may be different, depending on the value you may want something in writing from revenue as clarification, accountant can say anything but they aren’t held responsible if revenue don’t agree! Just be wary that’s all I’m saying

mrcheez

srsly78 wrote: »

There is no norm or limit. Claiming personal stuff as business expense is illegal.

Who said anything about claiming personal stuff?

You can claim a percentage of a service as a business expense if that's what it's used for.

E.g. 25% of electricity if the office is 25% of the property as per what OP specified

Calahonda52

mrcheez wrote: »

Who said anything about claiming personal stuff?

You can claim a percentage of a service as a business expense if that's what it's used for.

E.g. 25% of electricity if the office is 25% of the property as per what OP specified

That is not valid, without knowing the full split of elec. consumption in the house.
Elec shower/cooker/hob/storage heating etc

St1mpMeister

Calahonda52 wrote: »

That is not valid, without knowing the full split of elec. consumption in the house.
Elec shower/cooker/hob/storage heating etc

The office would probably have the most power-consumption of the entire house I reckon as 2/3 PCs and a few monitors/external HDDs etc are on pretty much 9+ hours.

No electric shower, and only a small microwave/tabletop cooker used for 20 mins in the evenings. TV as well is A+ rated and used in the evenings.

So the office could well be over 25% but playing it safe by not going over that.

Calahonda52

St1mpMeister wrote: »

The office would probably have the most power-consumption of the entire house I reckon as 2/3 PCs and a few monitors/external HDDs etc are on pretty much 9+ hours.

No electric shower, and only a small microwave/tabletop cooker used for 20 mins in the evenings. TV as well is A+ rated and used in the evenings.

So the office could well be over 25% but playing it safe by not going over that.

Well get a 13 amp power meter, c 11 euro and fit it in the Home office and see.
I use one for my electric car when charging on the granny cable away from home, very useful.
Lowenergie Plug-in Energy Monitor Power
https://www.amazon.co.uk/gp/product/B00G955V0E/ref=ppx_yo_dt_b_asin_title_o08_s00?ie=UTF8&psc=1

However the bigger question is it whether drawing attention to this expense if you make it an outlier for the revenue.