Run your business from home? Get to know your VAT entitlement

If you are a business owner and work or run your business from home, you may be entitled to reclaim VAT on certain costs.

What can I claim?

Legislation around VAT claims for business owners recognises that you may incur a range of different costs in the course of running your business.

As a business owner, you can claim VAT on some of the costs of working from home and on other assets needed for your home office, including:

  • A proportion of your utility costs
  • Office furniture such as a desk or chair
  • Certain redecoration costs
  • Security costs for sensitive documents
  • Office cleaning costs.

You will need to report any home working expenses that you choose to reclaim VAT on through your VAT return.

Is there anything I can’t claim for?

In general, you can claim VAT on anything that you use for running your business from home.

However, some costs are more obviously business-related than others. Costs, such as office furnishings, may be wholly business related, but what about something like a phone bill?

This is simple if you have a separate work phone. You can claim 100 per cent of this cost. But if you use the same phone for business and leisure, you will need to work out what proportion of usage is businessrelated.

For example, if your bill is £40 per month and half of the calls and messages you send are for business purposes, you may be able to reclaim VAT on £20 of the total bill.

Remember to keep a record, including VAT receipts or invoices, of how much you have had to pay as you may need to defend your decision to claim for certain items.

You should also consider whether a claim can be considered ‘fair and reasonable’.

For example, you should only claim for a reasonable proportion of costs such as heating or electricity.

One way of working this out could be the percentage of time in the day you spend in your home office and the percentage of the floor plan it occupies.

With working from home becoming more common, there are likely to be further debates over what constitutes reasonable costs for VAT claims.

We advise that business owners keep an eye on regulations relating to reclaiming VAT and make sure that they keep accurate records in case any claims are challenged.

Contact us for further information or advice.