Claiming rental costs after moving to UK

[chrisl]

A friend of mine has come over from abroad where he lives to find a contract in London for a while.
The question is can he claim the house he is renting as an expense.

My understanding was that you can claim a second house if it specifically relates to your work or because your client sent you to a location miles away. Although in this case he came to the UK first to look for work, he didnt get sent here so in thery this is now currently the main place where he is residing.

He is living in the house in the UK out of choice more than because thats where his client sent him.

What are you views and what do HMRC say, i cant find anything set in stone for this?

[LisaContractorUmbrella]

HMR&C would not accept the rental costs as an expense as they are not wholly caused by and entirely attributable to the performance of duties. Your friend chose to come to the UK to look for work; had he been relocated by an employer it would have been a different matter; in my opinion this would not be allowable.

[Lumiere]

claim from where ?

we can only guess which scheme he operates

generally speaking, I would assume it will be perfectly OK to claim this from his Maltese Ltd if he has one

[Sally BFCA]

HMR&C would not accept the rental costs as an expense as they are not wholly caused by and entirely attributable to the performance of duties. Your friend chose to come to the UK to look for work; had he been relocated by an employer it would have been a different matter; in my opinion this would not be allowable.

I agree totally with Lisa.

[Bob Jones]

I don't want to throw a spanner in the works but it appears that the person concerned may have a residence abroad - the person posing the question refers to a second residence viz:

My understanding was that you can claim a second house

Compare this example - I live in my own home, with my wife and the dog, in Chester and I am out of work - I go to an agency and am offered a 12 month contract in London - I need an Umbrella so I go to .. Contractor Umbrella. I expect this to be the first of a series of temporary contracts all over the country so there is no doubt that the first assignment is temporary - I find a flat in London and take it on a 12 month lease - I assume we all agree that the flat in London is allowable - subsistence if applicable - plus travel Chester to London and London to client.

Contrast with this example - I live in my own home, with my wife and the dog, in Paris etc etc

The examples are exactly the same apart from the location of home - travel home to temporary workplace is allowable - I know of no legislation that restricts "home" to the home in the UK.

In the case of a non resident working in the UK there are three possible claims to travelling (all ITEPA) viz

S337
S338/339
S373 to 375

Claims are considered in the order as above and I cannot see any reason why, provided the home in the UK is not the only home, the claim would not succeed under S338/339.

Bob

[LisaContractorUmbrella]

Hi Bob Good point. I must admit I was not sure from the OP whether or not the friend had a home abroad that he would be financially maintaining whilst working in the UK - perhaps chrisl could clarify for us.

[nfoote]

Some sort of umbrella?

When I first came to the UK to look for work I had all sorts of companies ringing me saying if I got a contract job then they could do a similar thing to umbrella companies in that I would be employed by them and "sent" to work for the contract client.

In this way it would be as if this umbrella-like company had actually brought me out from my home country on secondment specifically for this contract and I could claim as expenses ALL living and subsistance AND flights to and from my home country including the original flight over before I'd even heard this company!

Anyone heard of this type of scheme? I ended up making the mistake of going perm so didn't/couldn't follow up on this. This was early 2009.

[xchaotic]

Don't know if it helps but I'll describe my situation.
Like many sane people I do try to stay out of London as much as possible and here for the money mostly. I only rent here because I have a contract here.
Therefore I put the rent as my expense, before I started renting, I was staying in hotels and I put that in as well.
Renting a small flat rather than staying in hotels is cheaper and is a simple business decision.
However going back home for the weekend is not something that I would call a business activity, arguably you could still claim it but personally I only did so if it coincided with other business travel.
In my case it's easy to justify as I have subcontractors doing work for me abroad.

My accountant feels it's ok, but as this is a recent development, I've yet to see if Hector agrees.

[meridian]

It's a well constructed argument Bob, but it misses the point that those sections apply to employees. Your argument puts the employment contract before the renting of the second house - in this instance, the "friend" is not an employee of any company, has rented a house before any contract, and the house (and location) are not dependant on employment.

The friend is not being sent here in the capacity of an employee, and therefore fails the "temporary employment" test of S339(5) (notes)

However, as the friend does not appear to be ordinarily resident, once s/he gains a contract s/he may get relief for travel between the UK and their overseas home (S373).

[Bob Jones]

Meridian says

The friend is not being sent here in the capacity of an employee,

I know he isn't sent here in the capacity of an employee - he has come here seeking employment. The heading of the HMRC instruction that you quote is "employees on secondment to the UK" EIM77010 - Appendix 1: Employees on secondment to the UK - and as it would appear that the person in queston has not been sent here on secondment it is unlikely that the instruction quoted will apply in this case. The fact that there is legisaltion relating to people coming here from abroad does not mean that this is the legislaton that must apply to them - I said in my previous comment that the law governing travel expenses is:

S337
S338/339
S373 - 375

in that order ...

any travel claim under S373 is dependent upon domicle not ordinary residence and applies ONLY if claims under S337 or S338/339 fail.

I will revise my example as folllows:

Compare this example - I live in my own home, with my wife and the dog, in Chester and I am out of work - I decide to seek my fortune and go to London. I enter into a 4 week lease on a flat - I go to an agency and towards the end of the four weeks I am offered a 12 month contract in London - I need an Umbrella so I go to .. Contractor Umbrella. I expect this to be the first of a series of temporary contracts all over the country so there is no doubt that the first assignment is temporary - I therefore rent the London flat for another 12 months - I assume we all agree that the flat in London is allowable - subsistence if applicable - plus travel Chester to London and London to client.

Contrast with this example - I live in my own home, with my wife and the dog, in Paris etc etc

You refer to S339(5) - that is the 24 month/one workplace rule - I specifically discounted that by the comment in my example "I expect this to be the first of a series of temporary contracts all over the country" - therefore S339(5) doesn't apply - in my example - if it applies in practise then the claim fails....
Bob