do i include things like mortgage, electric, phone when doing my business accounts. it is a partnership?

Question

I am doing the accounts for a partnership do I include the both electric bills, phone bills, mortgages ect or what is the best way

Answer 1

erm, do you mean your own home mortgage and utility bills?

if you do, then please be aware that expenses are allowable if wholly and exclusively used for business purposes.

however, you can attribute an estimated % of total cost for business use or use an actual figure.

for the telephone, you need to look at how much you use it for business use and base a % on that usage . or you could just review every bill and work out which is business and which is personal, total it all up and then use the business element.

for household utility's (Use of Home as Office) there are 2 ways of doing this. the actual way, which involves totalling all bills for water, gas, elec and c/tax, then apportion the total cost over the number of rooms in your house. this is assuming you have a seperate room as an office. so you count the number of main rooms, bedrooms, living room, kitchen but not bath rooms, so say you have 7 main rooms including the office, you take 1/7th of the total cost as being business use.

or you could just use upto £6 a week for 52 weeks, which the Revenue will allow without questioning it. Anything over this amount will require back up calculations etc.. and proof. you may need to do it for 48 weeks tho as most people have say 4 weeks hols, 2 in summer and 2 over xmas.

as for the mortgage, this is a bit more difficult, I wouldnt claim anything is using own home if trade from, if however you have a business premises and remortgaged your own home to buy the business prems, then you can claim a % of your total mortgage interest which is proportionate of the amount borrowed for business over the total amount borrowed and attribute that % to the mortgage interest.

overall, any expenses that are personal and business need to be split so only business use is allowable.

if you have a good accountant, just include all the expenses and they will discuss the private elements with you, there are special boxes on the self employment / partnerhsip pages of a tax return which allow you to addback any private / dissallowable expenses so its all covered.

Answer 2

The IRS flags these with a red flag, so be VERY careful what you include in your deductions.

If you live in the home you do business out of, you can't deduct mortgage, electric, phone etc. unless it's done in one room set completely aside to be a business area. No using the room (say a downstairs or the living room) where it's used for normal activity by you or other people. It has to be solely business oriented.

Same for the business phone--it needs to be a separate number from your home phone, listed as a business and used ONLY for business. I know a taxidermist who got nailed on this, his business was audited and none of his deductions were allowed.

If you have a room you use for STORAGE only, for the business, then that's an ok one--you can deduct the portion of the size of the house that the storage room encompases, as well as 10% of heating bills and electric simply because it requires heat in winter and lights to see by. No portion of the water bill though unless there's a sink in the storage area.

Contact a tax preparer for details on all this, just so you do it properly and don't get caught. This type of thing is what the IRS loves to follow up on.

Answer 3

I assume from your question that you operate from a private house. In that case only those portions of the utility bills incurred for the business should be included in the books, not the mortgage since you'd be buying the house anyway! Keep a record of business phone calls, business usage of the electrics (or apportion by %) etc. You may have to satisfy the Revenue that it is fair & reasonable.