Wednesday, February 3, 2010

Claiming Home Office Expenses

For many small owned-managed businesses, a home office is a common feature of the business structure. Not surprisingly therefore, one of the most common questions that we are asked is what type of home office expenses are tax deductible against business profits. The following is a summary of some of the most common types of tax deductible home office expenses.

1. Rent/mortgage payments

Many people who use space in their home as an office enquire as to whether they can claim a portion of their personal mortgage or the rent as a rental expense in their business. For homeowners, this is usually not recommended from a tax perspective. There are two reasons for this:

(i) If the business receives a tax deduction for rent paid, it means that someone else must be treated as receiving rental income paid from the business. If you are a homeowner, the rent that the company is paying you will be treated as income in your hands. This will then be taxable income for you and you will pay tax at your marginal income tax rate, thus defeating any tax advantages. There is a common misconception that the homeowner may avail of the Rent-A-Roof relief scheme which would enable them to receive up to €10,000 per year in rental income tax free. This scheme is only available to persons renting a room in their home on a residential basis. If you are renting a room in your home to a business, the Rent-A-Room relief scheme does not apply.

(ii) There is a knock on affect on capital gains tax when you come to sell your home. There is an exemption from capital gains tax available for persons who sell their private home - this is known as Principal Private Residence relief (PPRR). i.e. if you sell your home at a higher price to that which you purchased it at, you are exempt from paying capital gains tax on the profit made.

If however you use a room or other space in your home for business purposes, the property is no longer considered to be 100% a private residence. You will therefore lose your PPRR on the portion of the house which is used for business purposes. It is possible therefore that you could have a capital gains tax liability on the sale of your private home.

Tenants do not have the same complications here as homeowners do. Tenants can claim rent payments as business expenses without worrying about any capital gains tax implications. In addition as the rent is payable to the landlord there are no issues regarding the need to pay tax on rental income received from the business.

2. Telephone

Regardless of where your main office may be or where you mainly conduct your business activity, it is likely that a certain element of business related telephone calls may be made from your home phone. Therefore it is possible to claim the cost of these business related telephone calls as a tax deductible business expense.

3. Broadband

In this digital age, few businesses can now function without some sort of internet or email access. Again, regardless of where your main office premises may be or where you normally conduct your business activity, it may be necessary to have the ability to connect to the internet for business purposes when you are at home. If you have arranged an internet/broadband connection at home to enable you to carry out business activities you may claim the cost of your broadband fees.

4. Heating and lighting costs

If you are working from a home office, it is possible to claim a portion of your home electricity and gas bills. The reason for this is because if you are working from home you will be using more electricity and gas than you would have had you been working from another location. As your utility bills will be higher as a direct consequence of your business activity, a portion of these bills may be allowable as a tax deduction.

5. Home insurance (where an additional premium has been paid due to cover for an home office)

This really speaks for itself as the additional premium has been incurred solely due to the fact that you are running a business from your home and it is therefore quite clearly a business expense. However, this is something that people often forget to consider. It is worth reviewing the terms of your home insurance policies when you are considering setting up a home office as many policies can be made void if you operate a business from your home without informing your insurance company.

The most important guideline to always work towards when trying to establish whether a home office expense would be allowable for tax purposes is:

Has the expense has been incurred "wholly and exclusively" for the purposes of your business?

In general terms, although allowing for some exceptions, provided the expense meets this definition, it is allowable as a tax deduction.


  1. This post answers almost all my questions. Could you answer one more question for me? I am running my bussines from home. I am renting from landlord, rent is paid by bank transfer with no description every month and I am not receiving any slips. May I use the rent then as a cost of running my bussines?

    Regards Mick

  2. As umbrella company employee can i cliam home office expense, i am renting?

  3. Hi Mick,

    In answer to your question, you can generally claim whatever portion of the rent that you feel is an accurate reflection of the business use of the property.

    However as with any expense that you wish to claim for tax purposes you must be able to provide evidence that the cost was incurred and is a genuine expense. If you have a tenancy agreement in place, this may be acceptable as evidence of the rents being paid. Ideally however you should try to obtain receipts from your landlord.

    If you would like any more information, please do not hesitate to contact us on

  4. Hi John,

    It is generally a little difficult for umbrella company employees to claim home office expenses. However, if you can get your umbrella company provider to allow these expenses then you should do so as it is the umbrella company which bears the burden of any incorrectly claimed expenses and not yourself.

    You would generally need to be doing a lot of work from home in order to claim any home office expenses and even then you would fall into the category of an “e-worker”. Revenue allow flat rate expenses of €3.20 per day (as at time of writing) to be paid to e-workers. They do also allow that additional amounts can be claimed where relevant but you would have to demonstrate the cost had been incurred purely and solely as a result of your employment. More information on e-workers can be found here:

    An alternative is to consider using a personal limited company structure rather than an umbrella company structure. A personal limited company will generally allow greater scope for claiming expenses and can therefore sometimes be more tax efficient than umbrella company structures.

    Fenero offer personal limited company and umbrella company services. More information about the differences between these structures and their respective advantages and disadvantages on our website at:

    Or you can contact us on

  5. Hi there,

    I was just wondering if the above only applies if you have your own company?

    For instance I work from home but am employed by a very large Irish company. I'm a rep but most of my time is spent in my office at home so I've found the heating and electricity bills have increased a lot since I moved from an office situation.

    I rent and am looking for a place on my own as its just not suitable because I need peace and quiet while I work. If I was able to get some relief it would help as most places are expensive to rent solo. Also it has been noted by others about the increase in bills since I started working from home.

    Thanks in advance for the help - blog is great!


  6. Hi Sinead,

    I work from home a lot in Cork as my employer's main office is based in Dublin. I do use broadband very significantly in my daily work - Skype calls, conference calls, webinars, as well as emails and online research - probably 4+ hours per day.

    Is it possible to claim this expense as a legitimate business expense? I have had broadband in the house before this job, and also obviously use it somewhat for home use (when I get time!)

    Thanks in advance for your response...



Note: Only a member of this blog may post a comment.