kevinringer
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Limited companies and farmhouses

How do you deal with farmhouse expenses for limited company farm businesses?

How do you deal with farmhouse expenses for limited company farm businesses? Sole traders and partnerships claim the business element of council tax, water, heating, lighting, rent etc for VAT and income tax but what limited companies do? If the expenses go through the company this triggers a BIK charge for the directors. If the expenses are kept out of the limited company then no BIK but no tax/VAT relief either. Do you keep the farm ownership outside the limited company and let it to the company?

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By sparish
22nd Aug 2017 09:17

We have always just treated them as a BIK for the proportion of the house (say 2/3rd) which is not used for business.

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By rhino83
22nd Aug 2017 09:48

You can either go down the BIK route or transfer the non business portion to the directors loan account.

We have done this for years and HMRC have even check the records of one of our clients who does this. Other than questioning whether the apportionment was correct, they were happy

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22nd Aug 2017 11:56

Thanks sparish and rhino83. That's interesting, so both of you basically follow the same accounting as sole traders/partners and don't actually charge the full cost of providing the accommodation as detailed at https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11428.

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By rhino83
to kevinringer
22nd Aug 2017 12:39

Sorry missed the last bit about ownership.

We normally keep the ownership outside of the company and just claim a portion of the costs, i.e. rates light and heat etc.

There are special rules for farm workers

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11342

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22nd Aug 2017 16:34

Directors pay market rent for accommodation. Private proportion of expenses through DLA.

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23rd Aug 2017 17:27

Interestingly if when the company acquired the farmhouse it cost them less than £75,000, which may well be the case for an old established business, and the company has spent no money on improving it, the BIK for occupying the farmhouse would still be based upon the old gross rateable value which could be very low, perhaps only £150 or less for a modest house - see https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11432

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to michaelblake
24th Aug 2017 06:57

That's very interesting Michael. Would this apply if the property is kept outside of the company by the farmers personally who let the company use the farm free of charge? Is there a need for a formal lease from the owners to the company? I've had a look at https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim11429. It mentions "the amount spent by a person involved in providing the living accommodation in acquiring it (in the case of a house etc this will be the cost of the freehold or leasehold interest)". If the property is owned by the farmers but the business is run by the company, who is providing the living accommodation? The farmers provide it to the company and the company provides it to the directors?

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