Taxpayers address - IT Contractor

Taxpayers address - IT Contractor

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I have an IT contractor client whose primary residence is at his house outside of London but he rents a flat in London purely for business purposes and claims the expenses through his Limited Company. As he spends his working week at the London flat, is it okay to change his personal address for SA purposes with HMRC to the London one without causing any potential problem or query from HMRC?

The same applies for the company in respect of VAT and PAYE, the address registered with HMRC is his home address but would be far easier if it was London.

I don't want HMRC turning round and saying that London is now his permanent base solely because of that.

On a related note, he spends the working 5 day week in London and the weekend at home. It's been suggested that he should only claim 5/7ths of the London flat costs, however I intend to argue that as the company can't sign a 5 day week lease with the landlord the full 7 day cost should be a company expense, regardless of whether the client stays on in London at the weekend or not. He still after all has his computer and office space set up in London whether its sitting idle or not.

Any thoughts on either issue would be appreciated.

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Euan's picture
By Euan MacLennan
27th Jan 2012 13:46

On dodgy ground already

"he rents a flat in London purely for business purposes"

No - he doesn't.  He rents a flat in London for the private purpose of overnight accommodation when he is not working in order to save the commute to his home.

I think you should consider Booklet 490, Employee Travel, Chapter 3, and particularly, the example of Eloise on page 14.  Renting a flat suggests that he may be working in London for longer than the 24 months that is the maximum allowed for a temporary workplace.  If so, the costs of travel, along with accommodation and subsistence, are not tax-deductible because this would be regarded as regular commuting to a permanent workplace.

Even if London complies with the temporary workplace rules, it is predicated on his home being the permanent workplace of his company.  To move the registered office and business address for PAYE and VAT to London would be fatal to this argument.

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By Sheepy306
27th Jan 2012 14:00

Euan, thanks for the response.

My question didn't mention anything about it being more than a 24 month period, which is what Eloise's example relates entirely to. It is of course a good example for those for who it is relevant to. It is not an issue for my client as he falls well short of that 24 month period.

His home outside of London is definitely his permanent base and primary residence, its frustrating then that you cannot simply have a correspondence address for HMRC purposes without it infering that it may be your main address.

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By Anthony123
28th Jan 2012 16:12

Only him?

Presumably also no-one else ever stays in or makes use of the flat? And he would not and does not allow anyone else to use it either at weekends or any other time? If he does this might somewhat prejudice his case that it is purely for work as a replacement for say paying for a hotel. I think you need to be very clear as to the parameters here as it will rebound on you were he to undergo an enquiry and find the flat expenses disallowed.

However I see no reason to apportion the cost if all the time he is there is genuinely on business. It comes as a package as you say.

 

 

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