Working from home and rent ?

[seo_trevor]

Hi,
A few years back i used to rent out a house and i remember a law that allowed me to take rent of so much per year and if i didn't go over this figure i didnt have to declare it or pay any tax on it. ???

Im now working from home and wondered if i can charge my company (limited vat company) a set amount per month for rent but keep it under this figure so i didnt have to pay tax ?

Is this possible ? any advice ?

Thanks
Trevor

 

[BMS]

Hi

Not too sure about this but I belive that there a capital gains tax issues in charging limited companies for household expenses like rent,electricity etc

 

[Ozzy]

I've had two different options given to me, but I'm afraid I dont know which is correct.

A nominal fee for Use of Residence As Office...

Or the other option,
Count how many rooms in the property = X
Claim X% of your household bills plus X% of the interest charges on your martgage as Use of Residence As Office.

The latter of the two sounds most logical to me as it has a formula to it

 

[BMS]

HI again Ozzy,

The second of the 2 is the standard option, but isn't there a CGT issue with this ?

 

[Ozzy]

I'm afraid not being an accountant I dont know, but it is my understanding that so long as you claim X% of the interest and not capital repayment of your mortgage its not classed as benefits.

 

[Alpha]

Hi There

technically the inland revenue will not query a nominal figure of around £5 per week for 'use of home as office.

If you wish to claim any more than this as Ozzy says you have to justify the calculation.

If you take all the normal household running bills - gas, electric, rates, and insurance divide by the number of room that are lived in ie do not include toilets, kitchen and bathroom and multiply by the number of rooms that you work in. That should give you a reasonable calculation.

It is advisable not to include mortgage interest in this calculation as that is when technically when you sell your house part of it relating to the room you have been claiming for becomes a capital gain.

Also for this reason many practitioners advise that you still use part of that room for living in eg have a television in there or a computer or desk where the children can do their homework.

Always trying to second guess a revenue inspector

 

[Jodimyatt]

I glad someone asked this question as I was thinking this recent purchased a house, get the keys tomorrow in fact.

As it is over 4 stories I am converting one floor into an office with a seperate enterance into my offices.

Could I claim this and morgage payments back or would it be easier to techinically rent it to myself.

 

[seo_trevor]

Thanks for the quick replys ...

Let me add a little more into the mix.

Limited company with 2 employees (directors)
Both work from home - not together ... 2 different addresses !

Can we both put in for 'rent' ?

 

[Alpha]

Short answer is yes.

You are recovering within the business a 'business' cost.

What is the next scenario

 

[Alpha]

Jodi

You could in theory charge the company rent as such but the rent would have to go on the individuals self assessment return as schedule a income.

You can then offset against this the costs of the rented portion of your home including a proportion of the mortgage.

Now the downside

Although legislation does not specifically say this is only for renting for residential purposes and some publication I have seen have stated that you can do it, the Inland Revenues stance is that they will claim that Pepper v Hart analysis of what the government said when it was introduced indicates that it is intended to apply to residential accommodation - but that analysis can only be applied if the act is ambiguous and it doesn't seem too clear.

The IR have stated their case in both their property manual and in tax bulletin 12 therefore you can guarantee that if they discovered you using this method you would have to risk appealing against their judgement.