The tax lady said - Mortgatge Interest

[MrAnchovy]

That's not quite right Debbie because you haven't taken into account how many rooms you use out of the 8. But the good news is that you don't have to count every hour out of 24 that is not business use as private use.

So let's say you use 4 rooms out of 8 when minding, so for 55 hours per week. 2 of those rooms are used by your family for 4 hours each evening by the family, and for 12 hours on each weekend day so 44 hours in total. But the other 2 rooms are only used byt the family for 8 hours on Saturday and Sunday.

The business use percentage is therefore ( ( 2 x 55 / 99 ) + ( 2 * 55 / 71 ) ) / 8 = 33.3%. This means you can claim 33.3% of all your household expenses - not just mortgage interest but also community charge and water rates (not just the 10% that NCMA told you), buildings insurance, boiler servicing etc.

[MrAnchovy]

I am going to ring and ask again on clarification of exclusive use as mine are 15 and 19 although I employ my 15 year old after school so I think she is staff and not child

It doesn't matter how old your children are, it is whether the rooms/hours you are claiming for are used exclusively for childminding. So if your 15-year old is in a room you are claiming for and she is doing nothing except helping you with the mindees, that is OK. But if she is doing her homework, or the 19 year old is watching television, that is not exclusive business use of that room.

[Chatterbox Childcare]

That's not quite right Debbie because you haven't taken into account how many rooms you use out of the 8. But the good news is that you don't have to count every hour out of 24 that is not business use as private use.

So let's say you use 4 rooms out of 8 when minding, so for 55 hours per week. 2 of those rooms are used by your family for 4 hours each evening by the family, and for 12 hours on each weekend day so 44 hours in total. But the other 2 rooms are only used byt the family for 8 hours on Saturday and Sunday.

The business use percentage is therefore ( ( 2 x 55 / 99 ) + ( 2 * 55 / 71 ) ) / 8 = 33.3%. This means you can claim 33.3% of all your household expenses - not just mortgage interest but also community charge and water rates (not just the 10% that NCMA told you), buildings insurance, boiler servicing etc.

You have lost me - I use 8 of my rooms each day and on top of this there is a kitchen and bathroom which I was told not to include.

Where do the numbers come from for your calculation please? Needs to be simplier for non accountants lol

If I only allow for the hours the rooms are used - what about the times that they are not used - i.e. when we are in bed - does that not count?

[MrAnchovy]

You have lost me - I use 8 of my rooms each day and on top of this there is a kitchen and bathroom which I was told not to include.

Sorry, are you saying that you use the whole of all 8 rooms of your house for the whole 11 hours each day you are minding? I don't think that would apply to most people.

I will make the workings for my example a bit clearer:

2 rooms are used by your family for 4 hours each evening, and for 12 hours on each weekend day so 44 hours private use each week. They are used for 55 hours each week for minding, so they are used in total for 44 + 55 = 99 hours. The business use of these 2 rooms is therefore 55 / 99.

2 rooms are only used by the family for 8 hours on Saturday and Sunday, so 16 hours private use each week. They are used for 55 hours each week for minding, so they are used in total for 16 + 55 = 71 hours. The business use of these 2 rooms is therefore 55 / 71.

4 rooms are not used for the business at all, and you have ignored the kitchen and bathroom.

You have counted 8 rooms in total, so each room is 1/8 of the whole house.

Your business use %age is therefore:

( 2 x 1/8 x 55 / 99 ) + ( 2 x 1/8 x 55/71 ) = 33.3%.

[MrAnchovy]

If I only allow for the hours the rooms are used - what about the times that they are not used - i.e. when we are in bed - does that not count?

No, that does not count, except for the room that you are sleeping in.

So you could claim partial business use of your main bedroom because it has a mindee's cot in it, and the mindee sleeps in the cot for 4 hours each day 5 days a week and the cot takes up 20% of the room. You sleep there 7 days a week for 8 hours (as if ) using 80% of the room.

Business use of this room is therefore 4 x 5 x 20% = 4 hours and private use 7 x 8 x 80% = 44.8 hours, so total use is 48.8 hours. If there are 8 rooms in total, you could claim 1/8 x 4/48.8 = 1.0% of all of your household expenses for the use of this room.

[leeloo1]

Argh! Mr Anchovy, I was talking to you about this on Mumsnet a while ago... you helped me work out I could claim 30+% (don't have expenses spreadsheet open) but I look after my own DS - plus 2 others each day , so does that mean I can't claim mortgage interest etc and everything at the higher rate after all.

[mrs lilly]

Wooppiee!!!!! My mortgage is £1700 a month so thats a massive chunk I can claim every month, and since I am now giving up CM as of this Friday I was about to sit down and work out my 2010/11 tax bill Thank You Debbie!!!!

[MrAnchovy]

I look after my own DS - plus 2 others each day , so does that mean I can't claim mortgage interest etc and everything at the higher rate after all.

The claim for household expenses is based on exclusive use as detailed in BIM47810, and HMRC will always take the view that a childminder is not using the home exclusively for a business purpose while he is caring for his own children as well as his mindees.

But the implications of this depend on your individual circumstances - if your own children are at school during the day in term time, if you have a baby that is asleep in one room for much of the day and so not using the rest of the house for that time etc. There are many factors to take into account, and unless you (speaking generally, not just you leeloo) are going to take professional advice on your specific circumstances, you will need to look at the whole of the relevant guidance as already linked to below.

[leeloo1]

Guess I can't claim the higher rate after all then - poor DS only 2 so a while before he goes to school. Ah well, at least I found out I was misclaiming before I submitted my tax returns.

Still miffed I can't claim any of my extortionate mortgage interest after all though.

Thank anyway.

[rose hol]

I spoke to the tax man today. Of the £300 intrest i pay each month, i can clain £25 per month now(My son is at pre-school), and come September (when he goes to school), I can claim £50 per month. They didnt want to know about how many bedrooms etc, but did warn me about capital gains tax. Not quite sure how this will affect me, But, £600 off my expenses will do nicely thankyou.

[MrAnchovy]

Still miffed I can't claim any of my extortionate mortgage interest after all though.

I didn't say that, I said that the taxman will take the view that any claim for a period a room is being used by the childminder's own children will be viewed as not being exclusive use. You can take a different view and claim what you believe to be a fair apportionment for the use of the room. If you are inspected, expect to have a disagreement about this and be prepared to lose the argument (and pay the extra tax). Providing you set out the basis of your claim in the notes section of your tax return and do not set out to deceive HMRC, there should be no penalty.

If you are looking to claim more than £1,000 of household expenses (including interest) a year, it is surely worth taking professional advice.

[rickysmiths]

I spoke to the tax man today. Of the £300 intrest i pay each month, i can clain £25 per month now(My son is at pre-school), and come September (when he goes to school), I can claim £50 per month. They didnt want to know about how many bedrooms etc, but did warn me about capital gains tax. Not quite sure how this will affect me, But, £600 off my expenses will do nicely thankyou.

Perhaps you should find out because it would affect you when you come to sell your house and you will probably have to pay Capital Gains Tax on the portion of the property you have been claiming business expenses on. This may not actually make adding £600 to your expenses worthwhile.

As Mr Anchovy has said it is adviseable to seek the advise of a professional who will be able to assess your situation.

I have looked into it with my Accountant. We had a big extention built last summer, increased our mortgage and I have a playroom. None of my house though, is used exclusively for childminding because it is our home. When we looked at everything, with my accountant, it was far to complicated for a tiny gain now, to risk the unknown of the Capital Gains Tax bill we could get if we move.

[MrAnchovy]

As long as each part of the house is used for a non-business purpose for some of the time, Capital Gains Tax is not an issue., More details here.

[leeloo1]

I didn't say that, I said that the taxman will take the view that any claim for a period a room is being used by the childminder's own children will be viewed as not being exclusive use. You can take a different view and claim what you believe to be a fair apportionment for the use of the room. If you are inspected, expect to have a disagreement about this and be prepared to lose the argument (and pay the extra tax). Providing you set out the basis of your claim in the notes section of your tax return and do not set out to deceive HMRC, there should be no penalty.

If you are looking to claim more than £1,000 of household expenses (including interest) a year, it is surely worth taking professional advice.

Thanks, sorry, I hope I haven't given the impression I was blaming you/your advice - I'm just fed up that I thought I'd be better off than I am. I hate tax returns/finances! The thought of having to be inspected and argue my case with a tax inspector fills me with dread.

I'd worked out the total household expenses would be around £4000... (at my previous calculations of 38% business, rather than family use)... I'll have a think about it ... I suppose DS usually sleeps for 2-3 hours per day (and is upstairs away from other mindees during that time)... so I guess I could claim that the downstairs was sole business use during that time? Would be kind of the same as if he was at pre-school for 2.5 hours? Would that work? Or maybe not as he'd still be on the premises?

Feeling slightly more hopeful that there is light at the end of the (mortgage interest dilemma) tunnel, but perhaps I'm just clutching at straws here?!

[newkid]

This sounds really interesting and a bit complicated too. Will pm you for spreadsheet if you don't mind Debbie. Thanks.

[helengreen13]

Debbie, would really like one as well, PLEASE x x x x x

[VeggieSausage]

I am going to ring and ask again on clarification of exclusive use as mine are 15 and 19 although I employ my 15 year old after school so I think she is staff and not child

My understanding is that I start work at 7 and finish at 6 so I have 11 x 5 days of business hours = 55 hours per week. Multiply 24 x 7 = 168 so my personal use is 113 hours per week and 55 working

I am taking my INTEREST part of my mortgage only for the year and dividing by 8400 (50 weeks x 168 hours) and then multiply by 2750 (50 weeks x 55 hours) then how many rooms do I use during the business time. Take the total figure calculated and divide by number of rooms in the house (do not include kitchen and bathrooms) giving you a price per room and then multiply this by the number of rooms used for businees

An example of this is £800 per month mortgage - 55 hours per week - 8 rooms

£800 x 12 = £9600 divided by 8400 = £1.14 multiply by 2750 = £3142.86

Someone will correct me if I am wrong.

Will write a spreadsheet to calculate it all soon (just need to put in your own hours and mortgage costs to calculate everything) - if anyone wants a copy then please pm me your email address and I will send it once done

thank you sooo much!

[Trouble]

My kids are 18 and 15 and i have a conservatory playroom just for minded kids can you tell me where i stand please

[mumof4]

very confusing! But please can i have a spreadsheet too and i will have a go. I had a conservatory built as a playroom but never claimed on it as i was worried about capital gains tax. looks like its worth trying to work it out