CM's - Do you put through Mortgage payments on your tax return?

Yes you can claim a portion of your mortgage interest.

navyeyelasH, don't be so shy - yours is the best answer here!

Unfortunately there is no hard and fast rule - HMRC's own internal guidance (linked to earlier in the thread) says "The following examples are a guide only and intended to demonstrate the principles to be applied. The examples are not intended to be prescriptive; each case will be dependant on the facts."

So in principle HMRC agree that if you use part of your home exclusively for your business (whether that business is childminding or anything else) for part of the day, you can claim part of any of the revenue costs that you incur in making that part of your home available. Interest is a revenue cost, so you can claim part of it. Any capital repayment part of your mortgage is not a revenue cost so you cannot claim that.

But what proportion you can claim depends on the individual circumstances, no one formula fits all. It is up to you to come up with a calculation and a convincing argument to back it up. HMRC might query your tax return and ask you about your explanation, but they probably won't unless you are claiming a large amount of expenses in relation to your income.

Where an accountant is useful is in coming up with a calculation and an argument that he knows will convince HMRC, but there is no reason why you shouldn't try it yourself - it is very unlikely that you would be penalised for claiming too much interest as long as your calculations are correct and made in good faith, so all you have to lose is the potential tax saving from a more agressive calculation. Base your calculations on the HMRC examples (I'll give you the link again here) and you will have a head start in any discussion!

Finally, in order that you do not have a potential CGT problem, you should make sure that any part of your home that you do use for business is also used for non-business purposes. If you have a home office, it is likely that you will do your domestic paperwork in there too. If you have a playroom that is used by mindees during the week, your own children/neices/whatever are likely to use it at the weekend (so you would only claim 5/7 of the cost, or if they use it in the evenings too some calculation on an hourly basis).

Accountants in the know about this sort of thing often follow messages on the freelancers topic.

I spoke to the CMer I work for (I'm an assistant) and she said she put through a % of her interest based on the rooms used and the hours of her business.

So say she her mortgage interest is £1000 a month and she uses 90% of her home for CMing - that's £900 a month. But she uses that 90%, 50% of the time (i.e. half a day, 12 hours) that means she can claim £450 a month.

She also has an accountant and she explained this to me - so it's gone from accountant to her to me so I can't be sure it's accurate. I also plucked those numbers out of the air just to demonstrate!

I am also not sure what effect this has for capital gains tax ? although I think capital gains tax is only if you used the rooms solely for childminding. So in the above example, if she used 90% of her home 100% of the time for CMing she could put £900 against tax but would be liable for capital gains if she sold.

Again this is all I think and a little bit of hearsay, can you afford an accountant? If they are good at offsetting your earnings you might find they pay for themselves in what they save you from paying in tax if that makes sense?

*That's if you're using your whole house for CM

mind you it depends on how many hours and what proportion of the house you were going to claim in order to make it "minor use"

Yes you can use this. If for example during the day 9-5 you use your downstairs only for childminding and there is no-one else in the house then its use for those hours is business use. See example 4 in the inland revenue examples - Chris the author.

Of course if the rest of your family is in the house while you are childminding it would not be allowed.

I attended a "Self-Emplyment" course for CM given by a guy from the HMRC and he said that you can claim a % of your mortgage INTEREST depending on the no. of hours you work per week, if you work 40 hours you can claim 10%; 30 hrs - 7%; 20 hrs - 5%; 10 hrs - 2%

I'm off to calculate floor space, time used, look up mortgage interest payments, etc

I would think this would flag you for a tax audit as soon as HMRC realized you were doing it. CGT is a minefield as mentioned above. If you did claim, of course, you would only be claiming on the percentage of the mortgage interest that you hold - divide it by however many people are named on the mortgage. But I still think its a huge risk and may result in a massive back-payment demand.

That's very interesting, I have been s/emp for 16yrs and have always claimed a portion of my home as office use, but when I started minding I was told I couldn't do this as HMRC gave other benefits like 10% wear n tear of gross and favourable % of utilities to make up for this.

It's all so frustrating and I get both sides of it, but blummin heck if the tax office can't even decide I've got no hope.

Are you a CM?

Ok, here is the information I used when I put a proportion of my mortgage payments through my accounts.

I had seen an article similar to this which gave details that the revenue had added a new allowance rather quietly.

I found this guidance from a link on the original article.

I then rang the Inland Revenue who said no when I asked if the legislation had changed. I pointed him to the guidance abouve. He read it, said I seemed to be correct and advised me to keep a copy of this guidance and the calcualtion in case it was ever queried.

As a result I am going to do the same again this year.

You do need to look at the numeber of hours each room is exclusively used for childminding over a year as a proportion of the whoe day 9ie all 24 hours) and make a calculation of the time you can approtion to it. You can also only include interest on the mortgage not the capital repayments as far as I understand that is.

I have used it but would recommend that you check it all out for yourselves first.

Nannynick - ARGGGGGGHHHHHH!!!!

I have been trying to send a link for the tax document. I can't do it, do you think if you could send me your e-mail I could e-mail the document that I got on an e-mail and forward it to you?

I'm not good at technical stuff, but I'm sure it would be of interest to other CM's here on MN, so if you could wibble it so that it would link it would be great!

Generally, any rooms in a house that are solely used for business purposes (and are efrectively shut off and not used at all when you are not doing your business) are deductible. The amount that is deductible is the interest only element of a mortgage X the number of rooms used for business / number of rooms in the house (excluding loos/bathrooms). However, if the business % is large (I cannot remember, but I would guess at 25%) then if you sold the house you would be liable to pay Capital Gains Tax on the same element of any profit you make on the sale of the house.

Given that I guess virtually all childminders would be using their normal accomodation (ie their normal living rooms, kitchens etc) then I guess the official guidelines are that you cannot claim. It would only be worth challenging I think if you had, say, an annexe that is locked off when not used for your charges, and even then you would need to make sure that you didn't have separate water/electricity supplies because IIRC that catches you out for CGT no matter what % of the total house it represents....

A link would be great if you do manage to find it online anywhere. I had a hunt on HMRC's site, plus Google and couldn't turn up anything meeting the description. Maybe it's just not online yet.

Nannynick - i was emailed it by a fellow minder, can't find a ref no on it I had a look earlier to see if I could find it on hmrc site, minder got a copy from ncma agm a few weeks ago. I'm a bit rubbish at attachments but will try to link it on here. Probably tomorrow though because I'm pooped tonight.

atworknotworking: what booklet? BIM52751 has been around for quite some time and couldn't be classed as a booklet... it's very short.

Can you provide a link to the booklet you have found. If you can't remember where you got it, is there a reference number on the booklet anywhere?

I know a CM that put a % of her mortgage interest through her books - she has an accountant. Is that wrong then?

I was told we could claim rent, but not mortgage.

Thats a bit rubbish! I was told on our business planning course that you could claim mortgage payments. I asked if that would make you liable for capital gains tax and he didn't know... once again the council show they don't know much

But otherwise ... your mortgage would be the same whether you were childminding, or not, so it is not a business expense.

If you register part of the house for business only, then you can claim part of the mortgage, but then you also have to pay business rates on that part of the house and you will have trouble when you are selling it. You would also need planning permission for change of use. I looked into it and it is really not worth it. (unless perhaps you were building an extension specifically for CM, but maybe not even then) ... and ... if it is separate to your house, then is it a nursery, instead of caring in your own home .....?

dmo where did you find out about claiming for rooms used solely for CM I have 3 that are only used for CM, would love to claim that back. I can't find anything apart from prev post quote "Mortgage payments are not deductable".

Do you think I should put house in DH name and pay him rent might save a few quid, it seems very unfair that rented's can mortgages can't, understand about the capital gains if you sell but even so, still peeved with it atm.

HMRC have a booklet for CM's with what you can claim in (sadly very thin), try looking on www.hmrc.gov.uk to find it it's publish date is May 2009 so very new.

Page 7 states "Mortgage payments are not deductable"

You can claim 10% wear and tear allowance of your gross income.

If you rent you can claim a max of % on rent depending on hours worked, 10% is max for 40hrs.

Can also get % for heat/light and water rates.

Can't claim at all for clothing even if it's sign written .

no cant do unless you have a room just for childminding and it is not used at all by the family

if you do do this then say your house has 7 rooms then you can put 1\7 of your morgage throught your books

but be careful as you may have to pay something if you sell or ofsted may class you as a nursery as your not using your family home