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Make use of lettings allowance for Co Director

Business premises overrun by paperwork- residence in genuine excess use

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History- client started a highly successful retail business 6 years ago- showroom and small office in commercial premises purchased outright.  Soon realised that the stock levels and paperwork had filled every square inch of the office area forcing bookkeeping etc. to be undertaken from his home, being a modest 3-bed semi but no garage.  Loft now full.  Some stock has to be stored at the home. Recently his daughter left (moved overseas with partner) and her old bedroom now shelved out and rapidly filling up with lever arch binders (very paper-intensive business).

Due to time factor client reluctant to scan 200-ish bulging lever arch binders full of confidential paperwork and long-suffering wife and co-Director unhappy about a storage building in modest garden.

With care client can now start to dispense with earlier items by secure shredding so the influx may gradually slow down. House removal totally out of the question and "secure storage" currently unsuitable due to excessive cost and inconvenience, the family is stuck with all this paper, but coping (just).  Business premises or home relocation removal out of the question.  Client reluctant to build an extension to the home.

Question:- in these genuine circumstances of excess home use, plus the need to deal with bookkeeping etc. can the company pay the director a rent (can be valued professionally) and the director claim Lettings Allowance to offset as detailed expenses calcs for HMRC would be a very long and involved job- the paperwork is still flowing in greater than ebbing out.  

Trust this matter is quite relevant to many clients, even though this case does involve excess paper in this particular business.

Thanks all in advance!

 

 

 

Replies (12)

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By CJaneH
15th Apr 2022 10:22

Do you mean 'Rent a room' (£7,500) or Property allowance (£1,000)?

Rent a room was designed to increase supply of living accommodation so no you can not.

Property allowance, I do not know as paying rent to him self? Is he trading through Ltd Co?

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By David Ex
15th Apr 2022 11:15

I vote no but, if you want a definitive answer, you could look in the HMRC Property Income Manual.

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Replying to David Ex:
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By WallyGandy
17th Apr 2022 10:33

Thanks for that-like wading through glue! (Did try....) See comment below.

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By The Dullard
15th Apr 2022 11:00

No. It's specifically excluded.

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By Wanderer
15th Apr 2022 11:08

WallyGandy wrote:

..... and the director claim Lettings Allowance to offset

Doubtful, property allowance probably excluded by S783AQ ITTOIA 2005.
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Replying to Wanderer:
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By WallyGandy
17th Apr 2022 10:34

So that's where my doubts lie!! The more you look the less chance of finding it until a "colleague" steps in- very many thanks indeed. You are a lifesaver (for me!)

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By Tax is always taxing
15th Apr 2022 11:20

Seeing as the question was long. Will keep the answer short - No.

But in a "highly successful" retail business I would suspect the cost of getting the paperwork scanned or stored shouldn't be that significant.
I'd be pitching a way to solve his problems and help him come less reliant on physical paper - cant think of a reason any retail business should be paper intensive.

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Replying to Tax is always taxing:
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By WallyGandy
17th Apr 2022 10:42

Point taken- he's "old school". Think I can persuade him for future, though. The Lady of the House will support this, I'm sure..... That said, the size of the backlog is daunting. For what it's worth, the only paper I now have is anything with a client "wet" signature. Everything else electronic pdf and backed up in three different places!

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paddle steamer
By DJKL
15th Apr 2022 13:22

Rent a decent size office, plenty of space in our neck of the woods, you then have the space to stop the system being swamped by paper before it gets even worse. (start scanning from today and in quiet times work through backlog.)

We are currently offloading a large part of our old records from last 30-45 years, acquiring space is all well and good (we had a pretty large office > 2,000 sq ft ) but it puts back what should have been done in the first place, path of least resistance, and I now spend odd days bagging for shredding the accumulated records (35 sacks done likely 35-50 sacks still to go)

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Replying to DJKL:
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By WallyGandy
17th Apr 2022 10:45

Good idea, but sadly there's a chronic storage space shortage in his area- cost prohibitive, hardly any availability and as he's a "one man band" and old school, this would not work for him in his area. It's a great solution- obviously I tried it but when he demonstrated lack of storage availability and resultant extreme cost had to back down immediately. That said, good luck with your backlog! Sounds like an awful lot of paper.....

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By WallyGandy
17th Apr 2022 10:49

Very many thanks to all- especially Wanderer who pinpointed the exact danger in legislation for me. Yes, it did seem too good to be true but ideal opportunity to spell the risks to the client. To all- he's strictly a one-man operation, wants to keep it that way and whilst many won't agree (myself included) he's not a person to change his ways for this and much else. In summary- it's time to back away and leave it firmly in the family. "No Entry" as we all know......

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By WhichTyler
17th Apr 2022 16:53

Do they need to access the paperwork regularly? Or is it just 'we have to keep this for 6 years'?

If they don't need regular access to it then 'deep storage' can be pretty cheap (we pay 25p/archive box holding 6-8 lever arches/month) and they can recover stuff for you for small charge or alternatively securely destroy it when its time is up

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