Renting your home office to your own company
Discussion
It is not unusual for a limited company that operates out of the home of the sole director to "pay" a fee to cover "Use of Home as Office". This is usually a fairly low level claim - although some claims put into accounts by directors or their accountants can be, lets say, rather ambitious. Depending on the size of the house, size of room etc, the amounts I would process through the company accounts as "Use of Home as Office" would rarely exceed £1,000 per annum - usually less.
If the company enters into a formal rental agreement with the house owner(s) and starts paying bona fide rents at a normal commercial rate i.e. thousands per annum - then the landlord(s) are obliged to return this rental income in their personal Self Assessment tax returns. If the house is jointly owned, then both owners will need to complete self assessment tax returns.
There may also be mortgage, capital gains tax and business rate issues if the company enters into such a formal arrangement.
If the company enters into a formal rental agreement with the house owner(s) and starts paying bona fide rents at a normal commercial rate i.e. thousands per annum - then the landlord(s) are obliged to return this rental income in their personal Self Assessment tax returns. If the house is jointly owned, then both owners will need to complete self assessment tax returns.
There may also be mortgage, capital gains tax and business rate issues if the company enters into such a formal arrangement.
Edited by Eric Mc on Tuesday 18th September 14:03
Sexual Chocolate said:
I presume I can then run the cost of broadband, electric, gas etc through the company as well as part of my council tax.
Business element of Broadband I would claim as a separate charge - probably including it with telephone costs rather than "Use of Home".The "Use of Home" charge is usually made up of domestic running costs (light & heat bills, home insurances, home repairs, council tax, water charges etc).
Honestly, this is what your accountant should be advising you on.
U<se a "License to Occupy" rather than a rental agreement - avoid any issues re business rates and PPR relief on any future sale.
Eric and I differ on this - I cannot say who is right but the facts are that I have clients who have claimed in the ranges of £1k to £6k for years without any HMRC query.
This is meant top cover the apportioned cost of any general costs such as mortgage, council tax, water rates, householdcleaning and toiletries as well as Broadband, landline, light, heat etc.
David
Eric and I differ on this - I cannot say who is right but the facts are that I have clients who have claimed in the ranges of £1k to £6k for years without any HMRC query.
This is meant top cover the apportioned cost of any general costs such as mortgage, council tax, water rates, householdcleaning and toiletries as well as Broadband, landline, light, heat etc.
David
I have some clients who claim up to £2,000 (big house - larger relevant costs).
Me and Sumo may not be that far apart really as I tend to include the Internet/Phone costs etc under "telephone" rather than the "Use of Home as Office" heading - so I am, in reality claiming a bit more than I said. I just split it in a slightly different way.
These days, the fact that HMRC haven't queried an expense I take as more likely to be a mark of their incompetence rather than any sort of tacit approval of the figures.
Me and Sumo may not be that far apart really as I tend to include the Internet/Phone costs etc under "telephone" rather than the "Use of Home as Office" heading - so I am, in reality claiming a bit more than I said. I just split it in a slightly different way.
These days, the fact that HMRC haven't queried an expense I take as more likely to be a mark of their incompetence rather than any sort of tacit approval of the figures.
Eric Mc said:
I have some clients who claim up to £2,000 (big house - larger relevant costs).
Me and Sumo may not be that far apart really as I tend to include the Internet/Phone costs etc under "telephone" rather than the "Use of Home as Office" heading - so I am, in reality claiming a bit more than I said. I just split it in a slightly different way.
These days, the fact that HMRC haven't queried an expense I take as more likely to be a mark of their incompetence rather than any sort of tacit approval of the figures.
^^^^this, i have claimed all of the above for years, working on a percentage of my total home costs. Not being an accountant, i would have thought a rental agreement may have brought about later from HMR&C the question of CGT on any gain from the sale of the home/property. Me and Sumo may not be that far apart really as I tend to include the Internet/Phone costs etc under "telephone" rather than the "Use of Home as Office" heading - so I am, in reality claiming a bit more than I said. I just split it in a slightly different way.
These days, the fact that HMRC haven't queried an expense I take as more likely to be a mark of their incompetence rather than any sort of tacit approval of the figures.
Eric Mc said:
These days, the fact that HMRC haven't queried an expense I take as more likely to be a mark of their incompetence rather than any sort of tacit approval of the figures.
I decided that it was not worth charging my limited company for use of the telephone and broadband or use of the home office, as quite frankly my actual costs have not changed from when I was a permy, Broadband is used by the family, and as I don't run a website, a few emails, and internet use have no impact. Telephone use is barely affected, so I just don't bother. I might be loosing a little in tax, but I sleep easier.
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