Use of home costs limited company

Use of home costs limited company

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One man limited company. The Director works a lot from home.

On a space and time apportionment basis it looks like around 15% of running costs of the home would be  reasonable and if he had been self employed this would create an allowable expense of around 1500 per annum.

As he is not self employed however is there another way round it? Could he charge his limited company 1500, then put this rental income on his personal tax return but offset it with the 1500 of apportioned expenses so there is no personal expense account to pay?

Replies (11)

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By soundadvice
27th Jun 2018 23:05

Sorry should have read .. so no personal tax to pay .. in the last sentence!!

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By Tim Vane
28th Jun 2018 00:14

This is common for OMBs. The usual method is a simple rental agreement between the company and the director based on apportionment of expenses as appropriate to ensure a net property income of nil. Just be aware of any CGT consequences but in most cases this won't be an issue.

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By soundadvice
28th Jun 2018 17:48

Many thanks for confirming
So much better than £4 a week!!

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Replying to soundadvice:
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By andy.partridge
28th Jun 2018 21:01

Yes, but this is planning for the future, not backdating a rental agreement that doesn’t exist.

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By arthurallan
28th Jun 2018 17:56

I’ve got an interesting one.
Client has set up a company to sell designer clothes via the internet. First year turnover around 45,000. She lives in a very expensive house in London owned jointly with her husband. So annual running costs are very high. On a reasonable apportionment basis of household expenses she could easily claim a use of home expense of 5,000 per annum possibly more just because she is working from a very expensive home. Are HMRC likely to balk at this even if she sets up the correct rental agreement between herself and her company and the apportionment is reasonable?

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Replying to arthurallan:
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By Tax Dragon
28th Jun 2018 21:21

What's the premise of that? Do expensive homes use expensive electricity or something?

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Replying to Tax Dragon:
By SteveHa
29th Jun 2018 10:59

@Tax Dragon

I'm having a couple of days off in the hope that my remaining P11D clients will get info to me before next week ends. That means I'm reading a lot of carp on the 'net right now. Your reply was the first today that made me laugh out loud :)

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Replying to arthurallan:
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By Matrix
28th Jun 2018 23:48

Get some comparisons of market rents for similar space in the area and get her to add up her expenses (and arrange a meeting so you can determine the business % and have a nose around).

She has to agree to provide this info annually and that the rental profits/loss will be included on both her and her husband's tax returns.

I only do this for my more organised clients or you are still waiting for them to find the mortgage interest statement in the last week of January whereas you had all the other info from their accounts.

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Replying to arthurallan:
By Tim Vane
29th Jun 2018 09:53

There's nothing particularly unusual about that. If the costs justify it then what's the issue. I have a number of clients in the south east and London who charge thousands in rent to themselves. The mortgage interest alone on some residences is thousands and so is the council tax. When the total number of rooms is small the apportioned costs are often quite high even when only one or two rooms are used in the business.

I am unaware of HMRC ever querying either the CT return or the individual (nil) property return.

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By arthurallan
29th Jun 2018 08:53

Costs like council tax, insurance, mortgage interest are a lot higher than an average home and so create a much larger than normal expense via apportionment.

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By FrogHappy
23rd Jul 2018 12:16

What about the new restriction on finance costs for residential landlords? Would you view the rental of a room in a residential property as falling foul of this new legislation? If so, it is no longer so simple to claim the same amount of expenses as income to arrive at a nil rental income each year.

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