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AccountingWeb any answers - use of home

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    AccountingWeb any answers - use of home

    Interesting chat on the video at the bottom of the page about use of home expenses.

    https://www.accountingweb.co.uk/tax/...and-home-costs

    Starts about 4m20s if you're not interested in the bit about accounting reference dates.

    #2
    I just chuck a monthly £40/month my way from LtdCo to me for Home as Office.

    Is he really saying that contrary to (at least my) previous thoughts, it can be upped to £120/month?

    Comment


      #3
      Originally posted by simes View Post
      I just chuck a monthly £40/month my way from LtdCo to me for Home as Office.

      Is he really saying that contrary to (at least my) previous thoughts, it can be upped to £120/month?
      How do you get to £40 per month?

      https://www.contractoruk.com/limited...ed_office.html

      For most of us it's just £4 per week as per the article above.
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        As far as simple use of home expenses goes (without jumping through hoops and charging YourCo rent) you've always had two options: 1) the fixed amount per week/month (£4/week) or additional costs, if you can show your calculations (this can only be additional costs of things like utilities but not a proportion of fixed costs like rent/council tax etc.).

        The supposed advantage of the rental option is that you can claim more in expenses to offset the rental income than you could if you claimed expenses directly including, I believe, a share of fixed costs, so its certainly feasible to claim more. I don't bother personally even though I could probably justify it (having a dedicated garden office building that is used 80% or so for work).

        Comment


          #5
          So for LtdCo directors, there's two options discussed in the video.

          1. LtdCo pays director £4 / week, no questions asked.
          2. Use a rental agreement in which LtdCo pays director regular rent, which is offset by all the expenses a landlord can claim, leaving net rental income of zero, thus nil tax liability.

          Isn't there a third option? Here's the question I have. Is there any reason NOT to have a rental agreement that pays the director an amount well in excess of landlord expenses? The director would have to report the net rental income (after expenses) on his self-assessment.

          But for those who are not using the employment allowance, and so have a salary of £8424, you have £3426 of unused personal allowance. You can use it to set off dividend income, but dividend income comes out of post-Corporation Tax funds. Or you could have your Ltd pay you rent, and use the personal allowance to set off the rent income, and not have to pay Corporation Tax on that amount.

          It's hardly defensible to pay almost £300 / month for an office if you don't WFH, of course, and even if you do WFH, depending on where you are that might be high. But is there any reason you can't look around to see what office space costs in your area, and have your Ltd pay a representative amount, even if it is well in excess of the expenses you could claim?

          Comment


            #6
            Originally posted by WordIsBond View Post
            So for LtdCo directors, there's two options discussed in the video.

            1. LtdCo pays director £4 / week, no questions asked.
            2. Use a rental agreement in which LtdCo pays director regular rent, which is offset by all the expenses a landlord can claim, leaving net rental income of zero, thus nil tax liability.

            Isn't there a third option? Here's the question I have. Is there any reason NOT to have a rental agreement that pays the director an amount well in excess of landlord expenses? The director would have to report the net rental income (after expenses) on his self-assessment.

            But for those who are not using the employment allowance, and so have a salary of £8424, you have £3426 of unused personal allowance. You can use it to set off dividend income, but dividend income comes out of post-Corporation Tax funds. Or you could have your Ltd pay you rent, and use the personal allowance to set off the rent income, and not have to pay Corporation Tax on that amount.

            It's hardly defensible to pay almost £300 / month for an office if you don't WFH, of course, and even if you do WFH, depending on where you are that might be high. But is there any reason you can't look around to see what office space costs in your area, and have your Ltd pay a representative amount, even if it is well in excess of the expenses you could claim?
            Nothing wrong with doing this, but as you allude to - commerciality is what HMRC would look to challenge in this case.

            Comment


              #7
              Thanks, helpful

              Comment


                #8
                Originally posted by craigy1874 View Post
                Nothing wrong with doing this, but as you allude to - commerciality is what HMRC would look to challenge in this case.
                Although easy to avoid problems by simply making sure you're not charging more than what would be an equivalent commercial rent.

                I also wonder if there are other potential risks of the "rent some space in your house to YourCo" approach w.r.t. it being more likely to be assessed for business rates, affecting your CGT exemption when selling and with your mortgage company. Probably not, but worth bearing in mind.

                Comment


                  #9
                  Originally posted by TheCyclingProgrammer View Post
                  Although easy to avoid problems by simply making sure you're not charging more than what would be an equivalent commercial rent.

                  I also wonder if there are other potential risks of the "rent some space in your house to YourCo" approach w.r.t. it being more likely to be assessed for business rates, affecting your CGT exemption when selling and with your mortgage company. Probably not, but worth bearing in mind.
                  Generally, so long as the space is shared - it has some domestic use - its disregarded for Business Rates and CGT.

                  You do, of course, do your household accounts and admin in your garden office, TCP?

                  Comment


                    #10
                    Originally posted by Jessica@WhiteFieldTax View Post
                    Generally, so long as the space is shared - it has some domestic use - its disregarded for Business Rates and CGT.

                    You do, of course, do your household accounts and admin in your garden office, TCP?
                    I certainly do, although I don’t rent the space to MyCo either.

                    I actually emailed the VOA before it was built and they confirmed that rates wouldn’t apply anyway as it was still considered largely domestic in nature. I suspect this is because what I do is broadly considered clerical work.

                    Comment

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