How Geoff Ended Up Owing Thousands After Overclaiming Working From Home Expenses
(Please note, names have been changed to protect individual's identities)
The Background
Geoff came to us through a recommendation from one of our existing clients. Unfortunately, by the time he picked up the phone, HMRC had already opened an investigation into his tax returns and he had just two weeks remaining to respond.
As a higher-rate taxpayer earning over £100,000 per year, any errors in his tax affairs were always likely to carry significant financial consequences.
Geoff already had a feeling about what HMRC were going to say. They had outlined the amounts they believed had been incorrectly claimed, and after reviewing the information ourselves, we had to agree with their assessment.
The Problem
The issue centred around Geoff's working from home expenses.
In the years following the Covid-19 pandemic, Geoff had claimed substantial amounts relating to working from home, including costs associated with building and maintaining a garden office.
Like many people, Geoff had assumed that the temporary flexibility around home working during the pandemic continued to apply. Unfortunately, this wasn't the case.
As an employee, HMRC's rules are very specific. Working from home expenses can generally only be claimed where an employee is required to work from home because their employer's office is unavailable or officially closed.
In Geoff's case, his employer's office remained available throughout the period in question, meaning many of the claims submitted were not allowable.
To make matters worse, Geoff had been advised by an accountant at the time. However, they were neither qualified nor regulated, and the claims were submitted without any meaningful review or warning about the potential risks.
The Outcome
Following their investigation, HMRC recalculated Geoff's claims and determined that he should only have claimed approximately £3,000 in total.
In reality, claims ranging between £5,000 and £15,000 per year had been submitted across multiple tax years.
As a result, significant amounts had to be added back to his taxable income.
Once the additional tax, interest charges and penalties were applied, Geoff found himself facing repayments of several thousand pounds for each affected year. Given the size of the liability, he is now arranging a payment plan with HMRC.
Unfortunately, HMRC investigations rarely stop at a single year. Once discrepancies were identified, they began reviewing other tax years as well.
We are currently supporting Geoff through the remaining enquiries and working with HMRC to bring the matter to a close.
How We Helped
When Geoff came to us, he was understandably stressed, frustrated and concerned about what might happen next.
Our role was to help him understand exactly where he stood, explain HMRC's position in plain English and support him throughout the investigation process.
While we couldn't undo the historic claims, we could ensure that the enquiry was handled properly and that Geoff had experienced professionals guiding him every step of the way.
Today, Geoff is a full Blue Rocket client and we're continuing to support him through the process.
Key Takeaway
This case highlights just how important it is to seek advice from a qualified and regulated accountant.
What started as seemingly innocent working from home claims has resulted in a substantial tax bill, interest charges, penalties and an HMRC investigation spanning multiple years.
Had Geoff been working with Blue Rocket Accounting from the outset, the incorrect claims would almost certainly have been identified before submission. Likewise, if he had our HMRC Investigation Protection service in place, we would have managed the entire enquiry on his behalf from day one.
Sometimes the cheapest advice can turn out to be the most expensive.
If you're unsure whether you're claiming the correct expenses, or if HMRC have already contacted you regarding an enquiry, it's always better to seek advice sooner rather than later.
