What rent was paid for income tax purposes?

What rent was paid for income tax purposes?

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Self-employed trader uses own home 10% for business purposes. He pays his landlord rent of £350 per month out of his bank account and receives Housing Benefit of £50 per month paid into his bank account. For income tax purposes is he allowed 10% of £300 or £350. BIM 47800 et seq. does not seem to cover Housing Benefit received. Housing Benefit is officially described "as a payment towards rent payable".

Common sense approach would seem to claim 10% of the net £300. But he does physically pay £350 each month. He is cash-strapped and the bigger tax allowance would be preferable.

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By Matrix
30th Mar 2015 07:10

I don't see how the housing benefit could only be allocated to the 90% area of the house for private use.  Even if he is cash strapped £12 tax saving a year isn't really worth risking or spending time on is it?

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By penelope pitstop
30th Mar 2015 13:20

The tax saved would be a tad more at £50 x 12 x 29% (20% tax plus 9% Class 4 NIC) x 10% = £17.40 per annum.

Yes, I had not realised it was so small. But it's the principle that's slightly interesting. As the client said to me, he gets Tax Credits because of low income and that does not feature on his Tax Return at all. But it would appear that getting Housing Benefit due to low income does indirectly affect his income tax/Class 4 NIC liability.

Unless anyone has any bright ideas I am going to net the two off and claim 10% of the lesser amount to be on the safe side.

 

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