Hi Guys,
I have clients (married couple) who trade at exhibitions, large shows, etc. and find themselves doing more and more business in London. Their hotel bills & meals can often come to £700 or so per week and they're toying with the idea of permanently renting a small studio apartment @ around £200 p.w. instead, if or when they approach break-even point.
How do we think the Revenue would view this ? There would be little or no private use, so logically it should be allowable in the same way as hotels and they could possibly generate income from weekly lets when they don't need it, as the dates of shows etc. are known months in advance.
Thoughts would be welcome.
Anthony
Replies (4)
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It'd come down to the "wholly
It'd come down to the "wholly, necessarily and exclusively" test in essence. If they're not staying in anything particularly lavish (200p/w in London sounds reasonable) and are generating taxable income from letting the apartment when they're not there which is properly declared, I can't see why it would be an issue - unless there's a specific piece of legislation that governs such scenerios.
HMRC may have an issue with it if there's no income and the expenditure they're trying to claim over the course of the year is significantly more than the cost of using hotels.
There was a case that Tim Healy won quite recently, quite similar. I think it was because he was staying there for theatre performances. I cannot remember the details nor can I remember where I saw it.
Are they a partnership...
... or do they operate through a limited company?
In either case the letting should strictly be treated as a rental business and the proportion of the rent paid relating to the rental business could be deducted from the income. The proportion of the rent paid relating to th use would be a business expense.
Alternatively, HMRC might simply accept you deducting the rental business income from the rent paid in the business profits in a manner consistent with the concession on excess trade premises, although it doesn't quite fit the terms of the concession.
If it's a company though, then there's a living accommodation benefit with a corresponding expense deduction under S.364 ITEPA 2003. Fine if there's no private use at all, but there will be Class1A NIC on the whole living accommodation benefit if the S.364 deduction (and any employee contribution) doesn't reduce the benefit to nil.