Informal or formal rental agreement

informal or formal rental agreement between a director and 'his' limited company home office

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I keep reading about accountants having these yearly home office agreements that they give to their directors each year for signature. These would contain costs of  property of gas/electricity-mobile/broadband/mortgage interest/CT in the director's personal name -and in the case of an owned flat -service charges.  However, I am yet to see one of these agreements and would ask do colleagues draft  their own (assume in this case an informal rental agreement) or get theirs from a solicitor (a formal rental agreement)? Other questions are do any colleagues instead draft or get licence agreements and not rental agreements which would make the contract far more formal//does this change a residential home office property into a commercial property?//what if the home office was an owned flat which of couse itself would be subject to a lease agreement?  A rental agreement does make the house owner a landlord and the limited company a tenant-should I be uncomfortable with this? Finally if the limited company and director have the same accounting date then I assume the rental agreement would be signed at the beginning of the accounting year.  However, when would the rent be paid-at the beginning/middle or end of the accounting period? Finally, if the limited company does not have a 5th April year end do colleagues proportion costs so that the period of account for the director remains 5th April or some other means?  thank you.  ps don't think I explained the last bit properly.  Accounting period of the limited company is say Sept and director prepares his rental accounts to 5th April.  Should instead the rental period of account be made coterminous with the limited company for ease of calculation or add on at the beginning (April to Sept.)and take off at the end (April to August)?

Thank you all .

 

 

Replies (7)

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paddle steamer
By DJKL
22nd Feb 2022 17:07

Not convinced I would ever be granting exclusive use of a part of my PPR, but if I were to so do I would do a licence drafted on a rolling month by month basis rather than an annual let, and rent would be payable monthly.

As an example, suppose your company goes into administration, are you you happy for the business run by the administrator to work from your spare room for up to 12 months?

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By David Ex
22nd Feb 2022 17:31

davidbarry wrote:

I keep reading about accountants having these yearly home office agreements that they give to their directors each year for signature.

Have you got links? Not something I ever recall having seen.

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By David Ex
22nd Feb 2022 18:18

There have been numerous related questions on the topic:

https://www.google.com/search?q=agreement+home+office+site%3A+accounting...

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By More unearned luck
22nd Feb 2022 18:43

A licence is more informal that a lease, so much so that it doesn't have to be rendered in writing. This lack of paperwork neatly gets over the liquidator problem, if was ever a real problem.

I'd check with your insurer before you attempt to draft something. I understand that Miss Ross-Martin might have a model agreement but you have to cross her palm with silver before you can see it. I haven't seen it, so this isn't a recommendation.

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Replying to More unearned luck:
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By Rweaver
22nd Feb 2022 18:57

Is your comment intended to sound as though it’s unreasonable for “Miss Ross-Martin” to charge for her work?

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Replying to More unearned luck:
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By More unearned luck
22nd Feb 2022 19:05

If the client's house is mortgaged then the mortgagee might have something to say if any form of security of tenure was granted to the company.

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Replying to More unearned luck:
paddle steamer
By DJKL
23rd Feb 2022 08:03

Re liquidator there are other problems, that was merely an example.

Restriction of PPR on sale, rates over part (maybe) plus change of use of part without PP thus possibly walking into insurance issues in the event of a claim? If you lease something as commercial office space do you need an EPC or a EICR?

Imho it is a Pandora's box re ensuring the arrangement does not fall foul of legislation.

I have no issue apportioning costs incurred on an area/time basis but leasing part of my house to any entity, even if I control said entity, for me is a step I would never take.

However each to his or her own.

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