Can companies claim home office expenses?

Sole traders using home offices for business have long been able to claim deductions for home office expenses. Now, through lockdowns and increased accommodations for work-life balance, many businesses have employees working full or part-time from home. This raises questions about whether companies can claim home office expenses.

If a company’s shareholder or director runs the company’s business through a home office and pays all expenses relating to the home office, Inland Revenue does not consider the company has incurred any expense. A company cannot claim a deduction for home office expenses, say in the home of a shareholder, unless it incurred the actual cost.

A company may claim a deduction where:

• the expense relates to earning business income
• the expense was incurred in the same income year the deduction is claimed, whether the company paid the provider, or reimbursed the homeowner.
• If the company reimburses an employee (or shareholder employee) for home office expenses, the reimbursement is exempt income for the employee or shareholder employee.

The owner of a look-through company (LTC) is not considered to be a shareholder employee, though, under certain conditions, they can be considered to be an employee. If LTCs reimburse employees using their home office for work, the reimbursements are tax exempt. An owner of a look-through company can claim for home office expenses in their own right, provided they can prove the expenditure relates to their LTC income.

Keep good records, including any agreements allowing the company to use the home.

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