OVERHEAD Questions Answered
What are the overheads of the business
It is not possible to lay down rules on what are and are not overheads for every type of business, however a quick rule of thumb is that overheads (or Indirect, or Fixed Cost) are those costs which are incurred in the running of the business and which are not directly associated with a specific job. For instance you will pay for a telephone and advertising whether you get any business or not - therefore that is an overhead. If it can be attributed to a specific job (e.g. if you were a builder you would only have to buy bricks if you got the job) then it is not an overhead and becomes a Direct Cost (or Cost of Sale)
I have an office at home, can I claim any expenses as overheads for running this office
Obviously if you spend some time running your office from home then you have costs that you would not if you had an office elsewhere. A simple 'rule of thumb' is to count the major rooms in your home (let's say 3 bedrooms, 1 lounge and 1 dining room = 5 major rooms) If you use one bedroom as your office then it is acceptable to claim 1/5 of you Heat/Light/Electricity, etc. as an Overhead. This would then come off your end of year profit to calculate your Tax Liability.