CGT implications of Home Based Ltd Company

CGT implications of Home Based Ltd Company

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If a husband and wife as directors run a Ltd company from home what is the most efficient way to charge some expenses to the company?

Given that the company is a separate legal entity some charge would need to be made by the individuals to the company.

This could be done by way of a rental agreement which states that the area occupied by the company is not for its exclusive use. The rental income would have to be stated in the individual tax returns of the directors split say 50:50 and then covered off by expenses giving a nil profit.

So far so good.

My concern relates to the CGT implications of the main property.

Given the above would it be totally covered by Private Residence Relief or would this be restricted?

The HMRC website states:

Using your Home for Business Purpose

You might work at home, running your business from there. You can still get the full amount of the relief as long as you keep using all of your house as a home. For example, the room you use as an office may also be used as a guest bedroom.

If any part of your home is used exclusively for business purposes, you'll have to work out if there's any Capital Gains Tax to pay.

but then it goes on to say:

Letting all or part of your home

If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it. But you may get another relief known as 'Letting Relief'. 

As I understand Lettings Relief is only given to renting out for residential use. In any case there is a maximum limit.

Hence my concern. If to charge expenses to the company the directors make a rental agreement with the company would they by so doing make part of the property subject to CGT?

Any advise and clarity would be greatly appreciated.

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By cparker87
31st Dec 2013 17:05

Valid, viable and common

tax planning. Just do not award exclusive use to the Company of a part of your home. Do bear in mind that whilst the wording of the contract is important, so too is that the actions of the parties are in accordance with the contract.

 

In short... just make sure you do what you say in the contract and don't let the Company have exclusive use of an area.

 

 

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