Dear Contractor Doctor,
I am a contractor working away from my home, which is my main place of residence. I work away from home during the week and return back at the weekends.
I previously rented a property to be closer to the client but, a year after starting the contract, I then decided to purchase a property as this would enable me to be closer to the current client and other potential clients in the area.
When I rented a property, I claimed the rent as an expense. Can you confirm if I can claim the interest on my mortgage as an expense, as well as my moving expenses, such as conveyancing fees and removal costs?
Contractor Doctor says:
It is unlikely that you would be able to make a strong case to HMRC that you are entitled to claim any expenses on the purchase of a second domestic property, even if it is to be closer to your client.
However, as David Colom, of DJ Colom Accountancy explains, if you are purchasing what is effectively a business property then you would be able to claim. “If you have bought what is effectively an office so that you can work closer to your clients, then all costs are deductible,” says Colom.
If you have bought what is effectively an office so that you can work closer to your clients, then all costs are deductible.
David Colom - DJ Colom Accountancy
“The property must be furnished like an office, although if it happens to have living accommodation that only the contractor uses, not their family, this is not an issue.”
But, as Colom continues: “If the property is solely a domestic property, effectively a second home, then there is no tax relief allowable on the capital expenses or on the costs of purchase.”
If part of the second domestic property is to be used for work purposes, then the same rules regarding home working expenses and allowances would apply as they do to a primary residence.
HMRC updated these rules earlier this year to include a pro rata allowance for costs like mortgage interest, fixed costs, council tax and repairs and maintenance.
Good luck with your contracting!