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Renting a second house as an office

Client needs an office but would prefer a house

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Hey all,

So a current client needs an office. He works long hours as a self employed contractor. He is a remote worker and works primarily in his home office. 

Because of personal issues and his house now becoming what is unfortunately close to a care facility for other family members, he needs to get an office. 

Because of the care needs of the family, he needs to stay close to home. However the closest offices are a 20 minute drive and quite expensive. 

As he works odd hours and sometime very late or very early, he's come up with the idea of renting a house that is close to the family home that a friend of his is putting on the market for rent. The cost of the house is cheaper than getting an office, has more space, and amenities like a kitchen so he can cook his own meals if he is there for a long time. 

He can also use the extra space to store files and other furniture for the business and clear some space for the extra equipment needed for the family members' care. He can also sleep there if he really needs and provide a space for his child who is going into their A-levels to work without the distraction of the family home. 

In principle I think this is a great idea. It suits his needs better, is cheaper and will help the family out considerably. It will also allow him to earn more money as he is paid by project completion and the removal of distractions at home will allow him more capacity to take on more projects. 

What I essentially need help with is, whether or not and how, I can justify this as "Office Rent" and an allowable cost to the business. 

He pays the mortgage of the family home already as well as all the bills and would then also be paying the rent plus bills of the house which will serve as an office. The mortgage and all cost relating to the family home is paid out of personal money.

My thinking is that aslong any tax investigator knocking on the door can go in a see that it is primarily an office, it should be ok. But this is a new situation and no-one I have asked seems to know how to go about it. 

Any help appreciated. Thanks

Replies (23)

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By cheekychappy
15th Jun 2016 14:06

If it is such a good idea, the tax consequences should be trivial to your client?

There is something to be claimed but I would get it out of your head that your client is renting an office.

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Replying to cheekychappy:
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By RajD
15th Jun 2016 14:36

Drawing the money to pay for the rent would affect his personal tax position. And no, given his situation, any tax saving is less than trivial.

He supports a very ill wife, his elderly parents and a teenage kid hoping to go to uni.

So anything I can do to help, I will try.

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By JimFerd
15th Jun 2016 14:14

Well if he can convince his accountant and HMRC that it's for business reasons, then he should be able to convince his wife too.

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Replying to JimFerd:
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By RajD
15th Jun 2016 14:27

Not sure what you mean here. If you couldn't work it out, it's his wife that is bed-bound with MS and needs constant care from healthcare workers and nurses...

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By JimFerd
15th Jun 2016 14:35

I was only joking.

I doubt HMRC will care that he'd be working from a residential premises as opposed to a commercial one, assuming any private use is accounted for properly.

There might be an insurance issue though, in that your clients friend (the potential landlord) will need to inform his insurer that it's being occupied for business purposes.

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Replying to JimFerd:
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By RajD
15th Jun 2016 14:38

That's a good point - Thank you.

Sorry, have had some real snide remarks on these forums over the years.

I'll ask about the landlord and maybe drop him a call. Thanks

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Replying to JimFerd:
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By RajD
15th Jun 2016 14:38

That's a good point - Thank you.

Sorry, have had some real snide remarks on these forums over the years.

I'll ask about the landlord and maybe drop him a call. Thanks

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Replying to RajD:
By The Highlander
15th Jun 2016 14:49

Planning permission is another point to consider. The fact that it is a residential property rather than a commercial property from a local authority perspective could give rise to issues if he's planning on claiming the majority of costs as business expenses.

Whether HMRC would go down that route for the purposes of a tax inspection I don't know but they certainly use it as a source of evidence for DIY vat claims so it could come into play.

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Replying to The Highlander:
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By RajD
15th Jun 2016 15:10

Wow - never thought of that. I know someone in planning in my local council, it's a different council but I'll call them.
Thanks

He's not Vat registered so no claims being made for Vat at the minute.

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Replying to JimFerd:
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By qhas
18th Jun 2016 21:31

JimFerd wrote:

I was only joking.

I doubt HMRC will care that he'd be working from a residential premises as opposed to a commercial one, assuming any private use is accounted for properly.

There might be an insurance issue though, in that your clients friend (the potential landlord) will need to inform his insurer that it's being occupied for business purposes.


Don't try squirming out of your stupid blunder. You were not joking. You don't fool anybody. Better if you owned up and said sorry for the silly comment
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By JimFerd
15th Jun 2016 14:47

I would look into business rates too. He might need to pay both business and residential for a mixed use property.

I'm no expert in this though, so there could be more to consider.

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Replying to JimFerd:
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By RajD
15th Jun 2016 15:12

Business rates are near the top of things I listed when I first had this on my table.
I didn't know you could pay both, I thought it was one or the other.
Thanks I will read up on mixed use property.

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Jennifer Adams
By Jennifer Adams
15th Jun 2016 15:03

A suggestion - I know of an accountant and separately a solicitor who use one of those big storage places along the motorway and do their work there. Clients are met at a hotel down the road.
Also - one of my clients is working out of a spare room in a local letting agents shop.
20 mins is nothing compared with the 1 hr 20 mins I used to drive to work every day. And the 2.5 hours I still drive every month to my 2nd office.

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Replying to Jennifer Adams:
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By RajD
15th Jun 2016 15:17

Yes true true. I agree, my office is close now but I remember the days of commuting into London every day from the Midlands - it was awful!

I think the issue is more around that the person in need of care has some piece of mind that he is in the house.

Atleast the closer he is, the more comfortable they will be in case of emergency or any issues when healthcare workers aren't there.

Didn't know you could use a storage space as an office!! That's nuts! How do they work it?

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Replying to RajD:
By petersaxton
16th Jun 2016 09:11

A relative is using a storage space and she says some people are using them as offices.
I work from an office in my house and I claim a proportion of my costs. Isn't it normal with your clients?

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Replying to petersaxton:
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By pauljohnston
17th Jun 2016 10:46

My view is that the new rented property has both private and business use. Business Rates do not apply as it has to 100% business. This was covered by a land Trubunals case. Your client should use the "office at home" calculations to work out what can be claimed. If his vehicle is a Ltd Co then make sure he issues a licence to the company and the company pays rent. I would suggest that this be the same as the office at home figure so that there is no profit from the licence.

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By Michael C Feltham
17th Jun 2016 11:25

Your client could expense a percentage of his total costs (Rent, Council Tax, Insurance, Water, Heating and Light etc) dependant upon how much of the space was honestly employed as "An Office".

In the past, I have had clients using, often, very spacious houses on a part-business/part-private use basis, with no problems.

Even one client who used part of a substantial and beautiful Georgian house in a village as a pharmacy. With no problems, whatsoever.

Came to a problem when he relocated into a much larger dedicated retail shop and the area previously used for retail had to be adopted as the house. Capital Gains.

However in your client's case, I fear his "Business Use" will easily stray into "Domestic Use"!

Daughters studying: client sleeping there; and so on.

Also remember, he may well be hammered by UBR (Unified Business Rates),the local authority questioning change of use from residential to commercial; need to take indemnity for pubic liability etc.

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By Michael C Feltham
17th Jun 2016 11:28

Hm seems we have lost the "edit" facility?

Of course I intended to write "Public" Liability; not pubic, but that's a thought anyway...

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Replying to Michael C Feltham:
By cheekychappy
17th Jun 2016 12:19

Michael C Feltham wrote:

Hm seems we have lost the "edit" facility?

Of course I intended to write "Public" Liability; not pubic, but that's a thought anyway...

Pubic liability ... insurance for when you cut your balls shaving.

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By JimFerd
17th Jun 2016 12:28

Just be mindful for older gents getting that insurance, there's quite a lot of excess.

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7om
By Tom 7000
17th Jun 2016 16:09

Check with the local authority its allowed...otherwise they will turf him out...got to have the right terms of use.

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RLI
By lionofludesch
18th Jun 2016 09:55

I used a house as an office for several years. I didn't put a sign up outside, which would have needed planning permission, I told the insurance co what it was beiung used for etc etc.

You might get busybodies from the TV licence place coming round with their spinning roof racks. They're very odd people. If you respond to their letters saying you don't have a TV, they come round to check. If you don't, they come round to see why you haven't replied.

One of them asked me why I just didn't reply to their letter and I said to him "it's a waste of a stamp, you come here anyway." Lunatics.

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By [email protected]
22nd Jun 2016 09:37

Most of the intended usage you describe is 'wholly and exclusively for the purposes of the trade' and therefore qualifies as business expenditure. However, providing a haven for his teenage daughter to study for A Levels, and for himself to sleep does not qualify. So some apportionment will be necessary, probably on a crude 'number of rooms used for business-v-number of rooms for non-business purposes' basis. In the event of HMRC enquiry, it will help convince investigators that it really is his office if he gives it as his business address to clients, banks etc. If he claims it's his office but all his business mail still comes to his home address, HMRC may find it a bit difficult to swallow..

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