Can My Company Rent a Flat Off Me?

[lje]

I'm looking at taking a gig based in Canary Wharf. I have my main home but I'm thinking of buying a flat in Canary Wharf (personally) and renting it to my limited company for the going rate. Because of the mortgage interest payments I don't think I'd end up paying much tax (although I need to work the figures out) but would this be allowed?

[norrahe]

Ask your accountant, that's what they are paid for.

[lje]

Ask your accountant, that's what they are paid for.

It's not about the accounting for this - it's the legal side. Any thoughts from anyone?

[Wanderer]

Ask your accountant, that's what they are paid for.

If we all just went and asked an accountant when ever we had a question, why would there be a forum for discussing accountancy here?

[Stag Cozier]

I'm looking at taking a gig based in Canary Wharf. I have my main home but I'm thinking of buying a flat in Canary Wharf (personally) and renting it to my limited company for the going rate. Because of the mortgage interest payments I don't think I'd end up paying much tax (although I need to work the figures out) but would this be allowed?

Yes it would. As long as you are renting to the company at a commercial rate, it would be a rental cost in the company books (24 month rule withstanding). You'll also have to account for the rental income on your personal tax return on any rental profit you personally make at either 20%, 40% or if you're lucky 50%

[moorfield]

Yes it would. As long as you are renting to the company at a commercial rate, it would be a rental cost in the company books (24 month rule withstanding). You'll also have to account for the rental income on your personal tax return on any rental profit you personally make at either 20%, 40% or if you're lucky 50%

Yes a rental cost in ltdco's books, which reduces your corp tax, but also if you live in the flat your ltdco is then providing a benefit in kind to you for using it, regardless of who the ltdco is renting it off.

So there's a potential tax double whammy for you personally there on
(i) rental income received from your ltdco
(ii) flat usage benefit received from your ltdco

I imagine HRMC would take a dim view of this kind of arrangement anyway.

[lje]

Yes a rental cost in ltdco's books, which reduces your corp tax, but also if you live in the flat your ltdco is then providing a benefit in kind to you for using it, regardless of who the ltdco is renting it off.

So there's a potential tax double whammy for you personally there on
(i) rental income received from your ltdco
(ii) flat usage benefit received from your ltdco

I imagine HRMC would take a dim view of this kind of arrangement anyway.

I would only be living in it during the week for the contract so I don't think there would be any BIK.

I also think that the personal tax situation would be OK. I can allow the mortgage interest against the income along with other costs (such as service charge and council tax) before calculating the profit. I can also take 10% of the gross rent off the profit as it will be furnished - that leaves me with only a bit of tax to pay.

The thing that worries me is (as you said) whether HMRC would take a dim view of it.

[Stag Cozier]

Yes a rental cost in ltdco's books, which reduces your corp tax, but also if you live in the flat your ltdco is then providing a benefit in kind to you for using it, regardless of who the ltdco is renting it off.

I can't see any dim view here or BIK.

If the rent is charged at a commercial value rate then it is simply a cost to the company and income personally. What you said up top is that "your ltdco is then providing a benefit in kind to you for using it, regardless of who the ltdco is renting it off". This is untrue.

If the ltdco is renting a flat I own to provide accommodation to it's worker and I am unconnected to this ltdco, how can that be a BIK? Apply that to hotel costs, if we took the same principal, you would be saying it is a BIK there too.

Have I misunderstood you altogether?

[moorfield]

Have I misunderstood you altogether?

As always I should have qualified my reply with "I am not a number bod".

This linky may (or may not) help ...

http://www.hmrc.gov.uk/helpsheets/hs202.pdf


Edit: Hotel costs are usually "wholly and exclusively" for business purposes, so exempt. Provision of living accommodation usually isn't, hence the BIK (maybe).

[Clare@InTouch]

As always I should have qualified my reply with "I am not a number bod".

This linky may (or may not) help ...

http://www.hmrc.gov.uk/helpsheets/hs202.pdf


Edit: Hotel costs are usually "wholly and exclusively" for business purposes, so exempt. Provision of living accommodation usually isn't, hence the BIK (maybe).

The context of the 'provision of living accomodation helpsheet' is different in that it refers to an employer who provides accomodation to an employee for no reason other than the fact they are an employee - there's no work reason. Indeed the guide provides exemptions for when there is a genuine work related reason such as for security, necessity of the job or when it is customary and enables an employee to carry out their duties better.

In the circumstances we're talking about an employee is renting accomodation closer to the temporary place of work, thus allowing him to carry out the work at all. Assuming this is not your only residence and you have a permanent home elsewhere, then the costs would be allowable.

Travel expenses: general: scale of expenditure: accommodation and subsistence: examples

The fact that he is renting from himself does not matter, as long as all transactions are carried out on an arm's length basis.