My ltd co renting my garden room

My ltd co renting my garden room

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MrJuice

Original Poster:

3,670 posts

163 months

Thursday 30th November 2023
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I have a garden room that is nearly ready. It'll be used as office space to run my ltd company

Am I allowed to charge my ltd co rent for this space? If so, how much?

The space is 30sqm and air conditioned with toilet and kitchenette. I know a home owner can have a lodger and not pay tax on something like £600 per month lodgings. Similar for ltd co?

Eric Mc

122,856 posts

272 months

Friday 1st December 2023
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Of course the company can rent the garden room.

Obviously, you, as the landlord, will need to return the rental income received in your self assessment tax return and pay the relevant income tax arising.

You might also want to consider what disclosure notes might need to be shown in the company's formal accounts.

Rufus Stone

8,239 posts

63 months

Friday 1st December 2023
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Also you will need to tell the Council.

If you have a mortgage it may prohibit letting.


Evanivitch

22,075 posts

129 months

Friday 1st December 2023
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Rufus Stone said:
Also you will need to tell the Council.

If you have a mortgage it may prohibit letting.
The council will be very interested in a "garden room" that has a kitchen and toilet if it didn't already have planning permission.

trickywoo

12,308 posts

237 months

Friday 1st December 2023
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I’ve got a garden office and run a limited. I don’t do the rent thing.

Eric Mc

122,856 posts

272 months

Friday 1st December 2023
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trickywoo said:
I’ve got a garden office and run a limited. I don’t do the rent thing.
That would be my approach too.

Did you put the costs of installing the garden office through the company?

trickywoo

12,308 posts

237 months

Friday 1st December 2023
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Eric Mc said:
That would be my approach too.

Did you put the costs of installing the garden office through the company?
No. I of course considered it but there are more disadvantages than upfront savings.

Eric Mc

122,856 posts

272 months

Friday 1st December 2023
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It's not always the best thing to do but I would certainly try and claim back for any furniture and equipment installed in the office. They should be eligible for capital allowances and maybe VAT reclaim (if your company is VAT registered).
Ongoing repairs and maintenance etc should also be claimable.

MaxFromage

2,148 posts

138 months

Friday 1st December 2023
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MrJuice

Original Poster:

3,670 posts

163 months

Friday 1st December 2023
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Evanivitch said:
The council will be very interested in a "garden room" that has a kitchen and toilet if it didn't already have planning permission.
The building has planning permission. I'm not sure if planning is needed for toilet and kitchen but both were shown in the approved plans


Evanivitch

22,075 posts

129 months

Friday 1st December 2023
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MrJuice said:
Evanivitch said:
The council will be very interested in a "garden room" that has a kitchen and toilet if it didn't already have planning permission.
The building has planning permission. I'm not sure if planning is needed for toilet and kitchen but both were shown in the approved plans
Often a "garden room" is permitted development, but that doesn't include a building with cooking and toilet.

MrJuice

Original Poster:

3,670 posts

163 months

Friday 1st December 2023
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I don't think that's right

You can check with the architecture equivalent of EricMC who's called Equus

smokey mow

1,111 posts

207 months

Friday 1st December 2023
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MrJuice said:
Evanivitch said:
The council will be very interested in a "garden room" that has a kitchen and toilet if it didn't already have planning permission.
The building has planning permission. I'm not sure if planning is needed for toilet and kitchen but both were shown in the approved plans
For business use? Or only for use incidental to the dwelling?

Evanivitch

22,075 posts

129 months

Friday 1st December 2023
quotequote all
MrJuice said:
I don't think that's right

You can check with the architecture equivalent of EricMC who's called Equus
It's got planning permission so it's irrelevant to the thread, but permitted development doesn't allow "self contained" living accomodation.

As I understood from previous threads on this, having plumbing and sanitation services to the building would raise the expectation that it could be used as accommodation.

I'm no expert on the matter and may have misunderstood previous threads.

MrJuice

Original Poster:

3,670 posts

163 months

Saturday 2nd December 2023
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smokey mow said:
For business use? Or only for use incidental to the dwelling?
Business use in my case would be to use as an office. I need privacy for my work so my house wouldn't always be suitable (if there are family/others around)

I'm pretty sure I can have a shower, kitchen, TV in the garden room. No one will be sleeping there, so there's no issue. There's no direct access from the front of the house. You have to go through the house to get to the garden.

paddy1970

812 posts

116 months

Saturday 2nd December 2023
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MrJuice said:
I have a garden room that is nearly ready. It'll be used as office space to run my ltd company

Am I allowed to charge my ltd co rent for this space? If so, how much?

The space is 30sqm and air conditioned with toilet and kitchenette. I know a home owner can have a lodger and not pay tax on something like £600 per month lodgings. Similar for ltd co?
You are allowed to charge your limited company rent for using the space in your garden room as an office. This is a common practice where business owners use part of their home for business purposes.

The rent charged should be a fair market rate, comparable to what you would pay for a similar space elsewhere. It's important that the rent isn't set excessively high just to move profits from the company to yourself

The rent you receive from your limited company will be considered as income and must be declared on your personal tax return. You may deduct certain expenses related to the rented space, such as a portion of your home's utility bills, property insurance, and maintenance costs.

Using part of your home exclusively for business can potentially affect the Private Residence Relief, which normally exempts your home from CGT when sold. However, if the office space is used only part-time for business and remains part of the home setting (not exclusively for business), CGT may not be affected.

The company can deduct the rent as a business expense, reducing its corporation tax liability.

The rent-a-room scheme, which allows homeowners to earn up to £7,500 per year tax-free from letting out furnished accommodation, typically does not apply to spaces used for running a business.

If you are VAT-registered, there could be implications regarding VAT on the rental charges.

Finally, set up a formal rental agreement between yourself and your limited company to document the arrangement.


Edited by paddy1970 on Saturday 2nd December 06:38

Pit Pony

9,242 posts

128 months

Saturday 2nd December 2023
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Does your wife or kids have lower personal tax liabilities than you?

Maybe you should consider renting it off one of them.

I'm not an accountant, but when I was running a Ltd company, I couldn't be arsed with that sort of thing.
Other tricks people play. Buying a motorbike through the Ltd company (its plant and equipment.
Leasing a cab Crew pick up as a pool car.
Buying office furniture that includes an antique drinks cabinet.

Just put the furniture through as expenditure, and meter the energy used. I put a second hand desk through off gumtree for £15. My accountant laughed at the screen shot of the advert, I provided as proof.

MrJuice

Original Poster:

3,670 posts

163 months

Saturday 2nd December 2023
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Thank you Sir

V kind

Rufus Stone

8,239 posts

63 months

Saturday 2nd December 2023
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There is already an established procedure to reclaiming costs of operating the business from home.

You count the rooms used for the business, you count the rooms available in the house, and divide one by the other. You can claim the resulting percentage of the house running costs from the business.

It's an expense of the business and no personal tax to pay.

Regy53

282 posts

138 months

Saturday 2nd December 2023
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As above there is no real benefit In this depending on your tax situation . You can already claim a room back against tax. However to invoice a room out from your house will hit you as a income which could be 40-50%? Incidentally you can take dividends out for less generally