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Use of home for Ltd company

Use of home for Ltd company

Can anybody kindly run through this for me, please, and how it's applied?

Thank you.

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By Hansa
21st May 2012 10:21

To avoid repetition

See:

http://www.accountingweb.co.uk/anyanswers/question/teach-me-leave-my-phone-saturday-morning

which raises a similar question if you mean allowing the company to use the room as it's registered office.

 

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21st May 2012 11:24

No, thanks for your reply, but I mean in terms of an allowable expense for a sole director running his company from home. A sole trader can claim a use of home allowance, but is it quite the same for a director?

 

Thanks for your comments

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21st May 2012 11:42

Yes and no

Very basically, there are three options:

a) £3 per week, no questions asked if you are required to work from home

b) Additonal costs incurred for working from home eg. heat and light, but not fixed costs such as council tax

c) Set up licence agreement whereby the company rents space in the drector's home. Can not be backdated, but could be a good plan going forward 

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21st May 2012 11:42

Basically to avoid a benefit

in kind the room/rooms are rented to the Company.  If it to be at cost the same calculation  that you would make for a sole trader suffices.  Otherwise there is the £3 per week default figure from HMRC

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21st May 2012 12:07

Use of Home raised to £4/week

The use of home was raised to £4/week.

http://www.hmrc.gov.uk/incometax/relief-household.htm 

 

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i-accounts
21st May 2012 12:12

Figurate is correct

Figurate wrote:

The use of home was raised to £4/week.

http://www.hmrc.gov.uk/incometax/relief-household.htm 

 

With effect from 2012/13

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By fpurves
21st May 2012 13:39

Previous Articles are on a-web

Nichola Ross Martin wrote some great articles previously on a-web  on this topic . Detailing what was allowed and the essential differences between limited company and sole trader (as these often get confused).

If you do a search I am sure you will find them.

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22nd May 2012 08:54

Rent

Most of my director/shareholder clients set up a licence agreement (as Andy Partridge said in his option (c), above) and charge their company a rent, based on a "use of home" calculation - Clients get a free template and they plug their info into it.  There are only a few that opt for the flat £4/week.

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By DRMJOB
22nd May 2012 16:57

The use of a proper rental agreement between the  property owners and the company is the best way forward. There should assuming the rental is reasonable be no difficulty in getting a CT deduction. The property owner is then in receipt of rent so can claim as a deduction any expenditure that is wholly and exclusively incurred in providing the facility to the company.If there is a legitimate property profit then that is taxed as normal but outside PAYE and NIC systems. This is a much better scenario then trying to get an employee  status expense deduction. Previous experience is that HMRC does not dispute this set up if expenses are reasonable.

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23rd May 2012 12:29

So, following up on the last two comments, can I check three points, please?

1. Is the rent charged as a P&L item in the company accounts, and then as income in the Property page of the director's tax return? 

2. Is the 'use of home' calculation one that a sole trader might use? - number of rooms etc.

3. How do you arrive at a 'reasonable rent' for a single room in a 4 bedroomed detached house?!!

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By DRMJOB
23rd May 2012 14:56

Rental

 In response to PM

 

1/. Yes

 

2/. It can be done that way

 

3/. You start from considering what someone unrelated to the company might charge.  This might be  easily up to £50  per day in my view.

 

 

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23rd May 2012 15:21

DRMJOB you say "The property

DRMJOB you say "The property owner is then in receipt of rent so can claim as a deduction any expenditure that is wholly and exclusively incurred in providing the facility to the company.If there is a legitimate property profit then that is taxed as normal but outside PAYE and NIC systems."

What if the employee/director does not own the property but rents? Effectively the company is paying him but he will be simply passing the sum received on to the landlord and there is no "property profit", do you think the revenue be likely to question that arrangement. In our circumstance he will be renting a house with one room more than his domestic circumstance requires specifically so that he can work from home on a regular basis.

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By DRMJOB
23rd May 2012 16:30

Rented Property

 I see no reason why paying out rent should be a problem indeed it probably makes it easier to calculate the   "reasonable rent" the company should pay. The tenant is not getting a tax deduction for the residential rent they pay rather just for the extra work space required.

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28th May 2012 12:14

Rates and CGT (again!)

I think I previously misunderstood the rent to company approach, this has been helpful.

I always assumed it was just transferring the tax from company to individual so was pretty useless, but if I understand the above correctly then you can do the old self-assessment working from home calculation to offset against the rental income. Though I guess really you are saying these are the cost incurred in providing the 'office space'. Does anyone have a nice template rent agreement to use?

The other thing that puts me off is the supposed risk of having to pay rates and CGT, though as far as I can tell this is just a theoretical risk. It's always brought up. Has anyone ever been challenged on either?

Thanks 

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By chatman
28th May 2012 18:16

CGT on Use of Home as Office
The way I understand it, CGT only applies if you have a room that is exclusively used for business purposes. As long as it is used as, for example, a spare bedroom a couple of times a year, CGT does not apply.

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By cfield
04th Jun 2012 23:28

Business rates on a home office

There is a very good article on the VOA (Valuation Office) website on this subject. In a nutshell, you should be exempt provided that a) the room is not exclusively used for business, and b) the room was not built or specially adapted for the business (eg for a dentist or osteopath).

This also goes for CGT. Make sure the room has some domestic use.

Best to have a license agreement rather than a formal tenancy. It is much more flexible and can avoid problems with stamp duty that may arise on the notional value of a lease if the rent is very high.

Incidentally, I see no reason why you shouldn't both rent a room to your company AND claim the £4 per week. After all, it is still your home, and the £4 does not have to be in lieu of any particular items of expense, so there is no danger of double-claiming. I've seen nothing official to indicate that it should be either one or the other.

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31st Jul 2012 09:37

claim the £4 per week

How much time, exactly does this guy have on his hands? Perhaps he should get out more?.

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By prourke
08th Apr 2014 16:09

What happens if I don't own the property

Interesting topic.

What happens if the Director works from home and therefore the Ltd company should pay rent, but the Director does not own the home (his wife does) and he is not named on the mortgage. Can he still charge rent to the Limited Company ?

I should hasten to add that while not named on the mortgage (which his wife pays), the Director pays all other expenses (water, gas, electricity, council tax, etc.) which is more than the mortgage payments.

thanks in advance

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