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Putting rented flat through a limited company

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I have a client who currently has an office and a rented flat in London. He is looking to buy a house 140 miles away and live there for half of the week. He has asked if his company (he is a director) can take over the lease of the flat and if the cost of the flat would be an allowable expense. He has assured me that it's solely for staying over in London to be close to the office as the commute would not be feasible otherwise.

I have seen other posts which suggests this is (based on a cetain crieteria) acceptable on a temporary basis, a contract for example, but nothing around a permanent arrangement. If anyone has dealt with this situation before I would be interested to hear from you

Thank you

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RLI
By lionofludesch
19th Sep 2019 18:34

What does the landlord say ?

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By Thomas654654
19th Sep 2019 18:51

The landlord is happy to rent the flat to the company rather than the individual

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By lionofludesch
19th Sep 2019 19:07

How will the company ensure that the property isn't available to the director at times other than his business trips ?

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By Thomas654654
20th Sep 2019 07:41

Short of installing cameras in the property I'm not sure there is a way to be 100% certain. I suppose the director could demonstrate that he was in the office each day after staying at the property and in his principle residence when he is not in work.

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By unearned luck
19th Sep 2019 23:32

In what sense would the arrangement be temporary? Certainly not any tax sense.
So, CT relief and a BIK.

Expect the landlord to require the director to guarantee the rent and dilapidations.

BTW, one criterion; two or more criteria.

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Replying to unearned luck:
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By Thomas654654
20th Sep 2019 07:45

The arrangement is not intended to be temporary, it's expected to be long term. I'm aware that it's claimable under certain criteria (I mean't plural) if temporary but I cannot find anything to reference a permanent arrangement.

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By Tax Dragon
20th Sep 2019 09:00

Thomas654654 wrote:

I cannot find anything to reference a permanent arrangement.

I can help you out there: Ch 5 Pt 3 ITEPA 2003

(I'm still making the assumption that TD pointed out regarding the lease.)

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By Tax Dragon
20th Sep 2019 09:14

Tax Dragon wrote:

(I'm still making the assumption that TD pointed out regarding the lease.)

Probably without justification. The heading talks about putting the cost through the company and the detail talks about the company taking on the existing lease. In those circs the payments are taxable on first principles under s62 and not taxable under Ch5.

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By Mr_awol
20th Sep 2019 10:10

This [***] new layout is confusing me - makes it look like TD is talking to him/her self:

09:00 TD replies to T654 quoting T654 but referencing a point made by TD (in third person)
09:14 TD replies to TD quoting TD and begins "probably without justification...……."

Confused? Yes.

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By Mr_awol
20th Sep 2019 10:12

Reported my own post. Admin, please look at it and consider the point made.

The new layout is ridiculous (or TD has two accounts, was having a conversation with themselves, and forgot to switch).

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Replying to Mr_awol:
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By Tax Dragon
20th Sep 2019 11:04

We beat Sam Smith to it.

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By Thomas654654
20th Sep 2019 13:16

I thought this was me being dim, glad I'm not the only one confused by the layout

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By Tax Dragon
20th Sep 2019 06:42

It's as unearned luck says.

That would be the answer pretty much irrespective of the underlying purpose - which as described is nowt to do with ability to work (the present arrangement presumably works just fine) and all to do with the director's desire to move 140 miles away from work.

Bonus, freebie tip: OMR election if the house purchase completes.

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Replying to Tax Dragon:
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By Tax Dragon
20th Sep 2019 06:51

Tax Dragon wrote:

It's as unearned luck says.

Dragon you're assuming the existing lease will be paid off and a new one taken out by the company. Gut feel (CBA to do all your work for you) is that otherwise you'd be looking at PAYE etc.

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By Thomas654654
20th Sep 2019 07:48

If it makes a difference he does have another office hundreds of miles away from either location which he visits roughly every 2 months for a week at a time.

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Replying to Thomas654654:
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By Mr_awol
20th Sep 2019 10:03

Thomas654654 wrote:

If it makes a difference he does have another office hundreds of miles away from either location which he visits roughly every 2 months for a week at a time.

He has an office there? Or he visits clients/customers/etc at their office there?

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Replying to Mr_awol:
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By Thomas654654
20th Sep 2019 13:15

His company has another office there yes

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By Mr_awol
20th Sep 2019 14:17

Thomas654654 wrote:

His company has another office there yes

So he has two regular workplaces provided by his employer, and commutes to both (unless his employer/company also rents a flat, house, narrowboat or other accommodation there too)?

Does he have regular, predictable days at each, just to seal the deal?

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By Mr_awol
20th Sep 2019 10:02

Thomas654654 wrote:

I have a client who currently has an office and a rented flat in London. He is looking to buy a house 140 miles away and live there for half of the week. He has asked if his company (he is a director) can take over the lease of the flat and if the cost of the flat would be an allowable expense. He has assured me that it's solely for staying over in London to be close to the office as the commute would not be feasible otherwise.

So he rents a flat as his home, and also has a (rented or owned) office nearby. He is moving away from his home but retaining HIS London office. As such, he wants his company to rent a (his old) flat to cut the commuting time.

Sounds to me like he's chosen to move away from his normal place of work, his travel to London is not allowable (ordinary commuting) and the provision of the flat would be a BIK.

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Replying to Mr_awol:
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By Tax Dragon
20th Sep 2019 11:07

Mr_awol wrote:

the provision of the flat would be a BIK.

The provision of a flat would be. But all that's proposed is that the company pays the director's outgoing. (It's his lease, his cost.)

Paying a cost on behalf of a director is earnings taxable under s62. There's no BIK.

One of us said that above.

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By Mr_awol
20th Sep 2019 14:15

Indeed you did (or was it the other TD, or your alter-ego?).

I'm reading the 'taking over the lease' bit of the OP as meaning a f0rmal assignment though - otherwise the OP would surely have just said the company was going to 'pay the rent'.

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By Tax Dragon
20th Sep 2019 14:23

Agreed, but we've covered both bases. (And I bet it is just "paying the rent". Do you really think the landlord has been asked?)

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RLI
By lionofludesch
20th Sep 2019 10:31

The more I read about this, the more I think the taxpayer has just got two residences and he wants tax relief for one of them.

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By Thomas654654
20th Sep 2019 13:19

Essentially yes but he would not want/use the flat if it were not for business. This is the only reason he wants the company to pay for it. The new house will be where his roots and leisure etc. will be with the flat as just a stop over to get to his office 3 days per week.

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By Tax Dragon
20th Sep 2019 14:04

Sorry if my previous comments confused you.

This is simple. It's s62 simple (unless the company enters a contractual relationship with the landlord, whereupon the tax charge arises under Pt3 instead).

The reason that short-term accommodation is sometimes not taxed on employees is that it can form part of a claim to relief under the travel and subsistence rules. Those rules don't come anywhere near the scenario you describe.

On the other hand, the full cost is allowable for the employer, as has been said above.

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