ALLOWANCES AGAINST INCOME

[Millenium]

Just started doing my accounts and tax return for the year ended 5th April and wondered if I am being unreasonable when I think that the Expenses and Allowances that childminders are allowed to claim from HMRC are in some cases unfair.

The particular issue I have is that a full time minder can put down 10% of their property rental against income but a person such as me, paying a mortgage or owning their property outright cannot put anything similar against their taxable income.

The other categories of Heat/Light, Water Rates, Council Tax, Wear & Tear etc. are common for all claimants depending on hours worked but why should those in rented accommodation be treated as an exception. Maybe I am missing something and someone can put me straight!

Nope your not missing anything, it's a pants rule.

My accountant suggested that I claim for using rooms in the house kind of thing, as I have 3 solely for minding, so he said to work out costs of mort / heat light, divide by no of rooms (excluding kitchen and loo) then figure out a day rate depending on how many days a week you do. Still thinking on it though. Apparently tis the thing to do for people working from home.

........which means that someone I know who is renting a 3-bedroomed house on the south coast near Brighton paying £1,500 per month will be able to offset £1,800 against her income in a year - something's not fair!!

all childminders can claim light, council tax and water and wear and tear. but only those is rented can claim part of there rent. but im sure there is a confusing thing people with morgages can do but dont understand it something to do with capital allowance/gain and think it affects other things

You can claim for the appropriate portion of the interest element of your mortgage payments, but you have to do some complicated calculations.

& if you did claim it may have capitol gains tax implications (maybe?)

Yep thats what my accountant said, sounded very complicated but probably worth doing if you have a largish mortgage.

I think the capital gains thing just comes in if you sell.

Well actually if CGT is due because of exclusive business use, it is due whether or not you have claimed the expenses, although in practice HMRC are unlikely to be aware of the gain.

Relevent section of the HMRC manual here.

In many situations, rooms used 'exclusively' for childminding will in fact be used by the family on the weekends, so in a typical case of a 3 bed house with 2 living rooms, one used exclusively for CM during the week you can claim 1/(3+2)*5/7 = 1/7th of all the household expenses including council tax, mortgage interest, insurance etc. Because of the weekend use, there is no restriction to Private Residence Relief which applies to the whole of any capital gain realised on sale (under current law) so there is no liability to CGT.

Note that the above is provided for information only and does not constitute professional advice.

Cor your'e clever