HMRC - claiming for your mortgage

[Chatterbox Childcare]

I need to state that I am not giving advice, I am providing information. Like all professionals (doctor, lawyer etc.), I can only give advice on a one-to-one basis after discussing all the relevant facts with a client.

The "information" that you are supplying is coming over as advice as you state that you are an accountant.

There are a lot of new minders on here who take written fact as such, especially from professionals.

I think you have made your point now and those who wish to take the information provided can do so and others who don't wish to will not

Can I now ask that the twoing and froing on this matter that seems now to be a debate of everyone's own opinions stops and let everyone make up their own minds.

I would like to offer my own thoughts on this - if you are consdering claiming the interest portion of your mortgage please get proper accounting advice. Remember YOU are responsible for what you claim no matter what Mr Anchovy, others or I say on the forum.

[Chatterbox Childcare]

Sorry but have more to add:

I have just read more information from the links that Mr Anchvoy posted:

Page 1 if your links and the mortgage section states:

Mortgage interest

If part of the home is used solely for business then an appropriate part of the mortgage interest is an allowable deduction.

We use all of our homes

Page 2 states:

Example 1

Angela writes up her business records at home. She uses a room solely for business use for a short period each week. She estimates that £104 covers the cost of the proportion of the establishment costs, plus the electricity for heating and lighting.

I can now see where all the differences in information comes from.

Childminders use all of their homes for childminding and therefore we don't have rooms that are for "specific use" and I believe that is why some Accountants and representatives of the HMRC are saying "don't go there".

Sorry to add more.

[catlyn]

but some of us only use part of our homes...for example only four out of a possible 6 rooms in my house is registred for use and none of the top floor?

just re read the post...it says solely for business....I dont use the rooms exclusivly for childminding...sorry if i've confused any one even more x

[mama2three]

but some of us only use part of our homes...for example only four out of a possible 6 rooms in my house is registred for use and none of the top floor?

but surely none of your home is only ever used for childminding..I suppose a few cms may have a playroom or similar which is never used apart from working - but even playrooms usually get used by the cms own children.

[aly]

but some of us only use part of our homes...for example only four out of a possible 6 rooms in my house is registred for use and none of the top floor?

just re read the post...it says solely for business....I dont use the rooms exclusivly for childminding...sorry if i've confused any one even more x

that is where the confusion is...none of our rooms are SOLELY for childminding...my living room, kitchen and also playroom that I am hoping to get will not be SOLELY used for childminding as my own children will have access...

[MrAnchovy]

Debbie I think that selectively quoting from individual examples is only going to add to any confusion so I'm going to keep this as brief as I can.

The first part of the main text in the HMRC guidance that explains the allowance for use of the home for business purposes is (my emphasis):

Fixed costs

Some costs relate to the whole house and have to be paid even if there is no business use. These include costs such as, Council Tax, mortgage interest, insurance, water rates, general repairs and rent.

If part of the home is set aside solely for business use for a specific period then a part of these costs is allowable. It will normally be appropriate to apportion these expenses by area and time.

So you don't have to use any part of your house only for childminding to qualify for partial business use (actually it is important that you don't because then you can in theory be liable to capital gains tax on selling).

I don't know any childminders that use the whole of their home for childminding (what about your own bedroom?), although it is possible I suppose.

[jumpinjen]

Can I now ask that the twoing and froing on this matter that seems now to be a debate of everyone's own opinions stops and let everyone make up their own minds.

We are entitled to debate on the subject.... the fact that there are new members on here does not negate this right. Just because they are new does not make them incapable!

jenni

[Pauline]

I don't know any childminders that use the whole of their home for childminding (what about your own bedroom?), although it is possible I suppose.

Yes we do, our bedroom sleeps a little one in a travel cot.

[MrAnchovy]

Yes we do, our bedroom sleeps a little one in a travel cot.

Well now I do! If the little one sleeps there 2 hours a day Mon-Fri (10 hours) and you use it 8 hours a day 7 days a week (oooh, 8 hours sleep - luxury - that's 56 hours a week) then you could in theory deduct 15% of the household expenses apportioned to that room - but NOT if you are using the 33% heat and light/10% council tax etc. method for the whole house which is almost certainly going to give you a better result overall.

[Trouble]

What about my conservatory i use it solely to childmind in nothing else

and i have an gas heater which is on all the time in that room

[MrAnchovy]

What about my conservatory i use it solely to childmind in nothing else

and i have an gas heater which is on all the time in that room

Then you may be better of claiming specifically for heating that room instead of the 33% allowance, but if you go down that route you will have to come up with a calculation for all your heat and light because you can't have 33% of everything plus 100% of part of it!

[Trouble]

Then you may be better of claiming specifically for heating that room instead of the 33% allowance, but if you go down that route you will have to come up with a calculation for all your heat and light because you can't have 33% of everything plus 100% of part of it!

Thank you

[Chatterbox Childcare]

Debbie I think that selectively quoting from individual examples is only going to add to any confusion so I'm going to keep this as brief as I can.

You posted the examples, I just looked at them. This text was copied and pasted from a link you posted. I thought that this might be the reason we had a difference on information.

The first part of the main text in the HMRC guidance that explains the allowance for use of the home for business purposes is (my emphasis):



So you don't have to use any part of your house only for childminding to qualify for partial business use (actually it is important that you don't because then you can in theory be liable to capital gains tax on selling).

But this is what the document says

I don't know any childminders that use the whole of their home for childminding (what about your own bedroom?), although it is possible I suppose.

Precisely my point! but I do use all of my house but not SOLELY

[MrAnchovy]

Debbie, I think Example 4 is the one that you want to look at which shows how to deal with rooms that are used part of the time for business and part by the family.

[Chatterbox Childcare]

Debbie, I think Example 4 is the one that you want to look at which shows how to deal with rooms that are used part of the time for business and part by the family.

Thank you - that will teach me to read the whole page

[Chatterbox Childcare]

We are entitled to debate on the subject.... the fact that there are new members on here does not negate this right. Just because they are new does not make them incapable!

jenni

Jen I am not saying that people shouldn't debate this.

There are quite a few childminders that come on to the forum and read about accounts amongst other things because they are new or inexperienced BUT they do not all have accountants. If they take the word of the forum (I try to get the facts and present them but always try and add "please contact the HMRC" on my posts) then they could get into financial trouble IF the HMRC asked them to justify their claims. They also don't make enough profit to justify the expense of an accountant.

Don't get me wrong, I would love to be able to claim all my mortgage costs pro rata but am yet to find an accountant to back this because of my job and I am ringing a few because of the information that Mr Anchovy has presented.

[jumpinjen]

Thanks Debbie..... I have a very reasonably priced accountant reccommended by other Cm's in my area and I pay for the luxury as i would rather not do it myself..... due to all the potential pitfalls and loopholes and grey areas, i prefer to leave it to a professional in her field!!!

jen x

[MrAnchovy]

Good grief, I must have been in a time warp when I wrote this - Indexation Allowance has not been available for Capital Gains Tax purposes since April 2008 (it has for Corporation Tax on capital gains but that doesn't help if you are not a company).

Instead, the gain should qualify for entrepreneur's relief which should eliminate or substantially reduce it. It is all a bit academic because there will be no capital gain anyway :~

I think I'll be around for a while

The first part of the gain realised in the year of sale is tax free - this is the Annual Exempt Amount and is currently £10,100. If you own a property jointly, you each have this amount available.

Furthermore, in calculating the gain you are allowed to take inflation into account. This is called Indexation Allowance and uses rates published by HMRC a few months in arrears.

You can also offset amounts you have spent improving (but not maintaining) the property, each adjusted by the Indexation Allowance.



Absolutely.

So let's do an example. House purchased by married couple for £250,000 in January 1998 and sold for £400,000 in November 2010. 3 bedrooms, living and dining room with 3 rooms used exclusively for 1/2 the time (of course because it is for less than 100% of the time there is no apportionment to business use for CGT purposes, but let's go with it for a while...) so 3 / 5 x 0.5 = 30% business use.

Unindexed gain is £150,000.

Indexed rise is 0.422 from the previous link so indexation allowance is £250,000 x 0.422 = £105,500.

Net gain £150,000 - £105,500 = £45,000

Gain apportioned to business use = 30% x £45,000 = £13,500

Each spouse has a chargeable gain of £6,750 which goes on their tax return, but no CGT payable due to AEA of £10,100.

[rickysmiths]

Debbie I think that selectively quoting from individual examples is only going to add to any confusion so I'm going to keep this as brief as I can.

The first part of the main text in the HMRC guidance that explains the allowance for use of the home for business purposes is (my emphasis):



So you don't have to use any part of your house only for childminding to qualify for partial business use (actually it is important that you don't because then you can in theory be liable to capital gains tax on selling).

I don't know any childminders that use the whole of their home for childminding (what about your own bedroom?), although it is possible I suppose.

Yep all the rooms in my house are registered and I have when caring for 4 under fives had a cot in each of our four bedrooms so mine and my childrens rooms. Most of my cm friends will use their bedrooms to house a travel cot for a sleeping child.

[mgtrem]

Sorry to drag this up again but went to a tax workshop last night and I'm still not 100% sure on this... We were given the Childminder leaflet - Info about Tax & NI and, as a previous poster mentioned, on page 5 it does say mortgage payments are not deductible. I questioned this as I had heard that a portion of the interest should be deductible. The presenter (an HMRC business advisor) looked at the handout and said it was incorrect. She advised us to take a look at BIM47820. However did not explain exactly what was and what was not allowable.

I have had a look today and still not 100% clear. BIM47820 refers you to BIM45745 - Specific dedutions:interest: mortgage interest relief; mixed use of premises.

http://www.hmrc.gov.uk/manuals/bimmanual/BIM45745.htm

It states

2. Where a part of the property, which is the borrower's only or main residence, is only sometimes used for business purposes (but for a significant amount of time and then exclusively) the loan in question may be apportioned on any reasonable basis that takes account of both the proportion of the property so used and the duration of such use.

Mortgage interest relief may then be claimed for the interest on the part of the loan attributable to residential use (subject to the £30,000 qualifying maximum) and a deduction may be allowed for the interest on the part of the loan attributable to business use

What do you think? Does this mean we can or have I totally missed something. Think you'd need to read the whole page to make sure that I havent taken the info out of context.

Look forward to hearing your thoughts