Home as office usage - accounting question

[braddo]

Hi Guys,

I have a Ltd Company and am just examining my options under BIM47825. I realise I have to work out the proportion of my apartment used for business, and then apportion an appropriate % etc. I'm fine with that part of the equation.

My question regards how to treat RENT under BIM47825. Let's say my yearly rental (paid straight to my landlord) is £10,000 and I've worked out that I can claim £1000 of this as an annual office expense.

So I enter £1000 as a rental expense in my books. Fine.

How do I account for the £1000 on my personal tax return? Do I have to show the £1000 as rental income paid from my Company to me?

If I'm in the same 20% bracket for personal tax, there doesn't appear to be much benefit in claiming the rent.

Could I get around this by arranging it so that I pay a separate amount to my landlord for business rental?

Any help much appreciated.

Thanks!

Brad

 

[Scalloway]

As you are paying the landlord you should put in a matching expense of £1,000 to give a zero profit.

 

[elaine@cheapaccounting]

BIM47825 relates to use of home for a self employed person.

What you can claim working for your limited company is different.

Here is the ref you want:

http://www.hmrc.gov.uk/paye/exb/a-z/h/homeworking.htm

or see my blog ....

http://www.cheapaccounting.co.uk/blog/index.php/do-you-work-at-home-rent-a-room-to-your-company-2/

 

[MyAccountantOnline]

Hi Brad when you charge your company a rent if you are recharging a proportion of your actual costs those costs will be offset against the income as expenses on your personal tax return leaving no taxable income.

 

[TimCaprica]

Hi Brad,

It sort of feels like everyone has half answered your question so I'll give it a go:

1) As Elaine says there are very different rules for Ltd companies that you need to be looking at instead. You basically have a choice of paying yourself a flat rate of £4 per week (£208 per year) or going for the complicated rent the property to your business option that Elaine's blog describes nicely. As a renter yourself though you should beware (illegally) enraging your landlord by sub-leasing part of your property. I'm not sure exactly how he/she would ever find out but it will almost certainly go against the terms of your rent agreement.

2) Assuming you do one of the above... I don't believe you would have to declare the £4 scale rate on your personal tax return. If you go for the more complicated option you would have to declare it as income but you can offset it with the costs of providing that. When working out those costs the sort of calculations you have been doing when looking at BIM47825 would be a perfect starting point.

So you will probably end up at a point where you have an income from subleasing of x perfectly offset with costs of subleasing of x on your personal tax return (so no tax due). On the company return you will have a deductible expense of x and save 20% tax on that.

Hope that made sense.

 

[braddo]

Hi All,

I'm sorry for not replying until now. I've been traveling all over the place (no fun stuff! conferences and the like). Thanks so much for the replies. I think I'm pretty clear on this now.

Thanks again!

Cheers

Brad

 

[vic1959]

Elaine, I tried to go to your blog but when i click on it it tries to load but after only a few seconds stops as if it has loaded but nothing's there. Have you moved it to another address? Vic