Director of a Limited company pays his girlfriend (now wife) £1500 a monthly for use of room in 2013/14 . This includes Rent, Electricity, Gas, Council tax , water rates, Telephone. He spends 8 hours a day working in that room
Presumably he can offset the the prorata costs of £1500 (based on hours/rooms) in his company accounts.
In his personal tax return he will have income and costs which will cancel each other out.
Replies (9)
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No
That would be fanciful.
Please do a little research before coming to such a wrong conclusion.
Which accountancy body?
As Andy has said, do a bit of research (e.g. HMRC website, AWeb Any Answers). Then go back to your accountancy body and ask them why they gave you the answer they gave you.
And ... Did his girlfriend declare the income to HMRC?
I am going to start paying my husband £3,000 per month for using one of the rooms in our house, sounds like a great thing to do!
I agree
I am going to start paying my husband £3,000 per month for using one of the rooms in our house, sounds like a great thing to do!
I agree, a great idea. I was thinking maybe £10,000.
Where do they live?
I could rent a whole house which would be available 24/7, and pay all the utilities, for less than that. She's ripping off her own boyfriend (now husband).
Tax
Accounting bodies do not normally provide tax advice, they must have only been advising on the accounting side. The company can deduct the rent as an expense for tax purposes if it is wholly and exclusively for business purposes. You should make sure there are some benchmarks to support the rate. The wife (assuming it is her property) will have to declare the rent in her tax return and offset any expenses such as the utilities you mention together with mortgage interest but no capital repayments before paying tax on any rental profit. If she is effectively paying 20% tax and he is getting 20% relief then there isn't really a benefit, unless there are high expenses to offset most of the rent. If she is paying 40% tax or higher then it is not a good idea.