Home Office Rental Agreement

[northernladuk]

We discussed this at my current client a while back and one of the lady's was having an extension built on the house that included a downstairs office. She was adamant she could claim the entire cost of the extension through the company. The fact there was a bedroom above it meant nothing to her. We pointed out that would mean LTD owned part of the house, everything else mentioned above and the need for common sense etc and she wasn't having any of it. Accountant said yes so she did. The frustration of trying to talk to someone who is so bloody minded and cannot see the wood for the trees was unbelievable and that wasn't just me saying that.

[northernladuk]

Thanks for the added information.

I'm now not sure whether the amount of rental should be based on something comparable using local serviced offices as a guideline (i.e. similar square footage, location, facilities) or alternatively based directly on a percentage of household bills.

Maybe I have misunderstood and have been thinking based on the former not the latter. From the above posts it sounds as if maybe the rental amount should be based on the latter (and should just not exceed commercial rates). The difference is quite a lot - and in fact if the latter, then yes it's probably not worthwhile.

Taking a cautious approach to this I would find it difficult to justify comparing my office to a purpose built managed service office. I would have thought a comparable guide would be an old house that has been converted in to an office such as a flat above a shop or something which would be considerably different rates. As lovely as your office might be I don't see how it can be compared to a Regus type place in both setup and cost.

[bartman]

Taking a cautious approach to this I would find it difficult to justify comparing my office to a purpose built managed service office. I would have thought a comparable guide would be an old house that has been converted in to an office such as a flat above a shop or something which would be considerably different rates. As lovely as your office might be I don't see how it can be compared to a Regus type place in both setup and cost.

Yes true.

[bartman]

Here's a link for rental agreement based on expenses in case it's useful to anyone.

Given that I don't have a huge office in a tiny flat, it does sound like £4/wk is the option. A Mc'D a week.

[stek]

Here's a link for rental income based on expenses in case it's useful to anyone.

...it does sound like £4/wk is the option. A Mc'D a week.

Not here in Dublin it isn't, even Mickey D's are fuk'n dear! It's €2 for a cheapo double cheeseburger that's about £1.29 in UK. €5.70 for a pint of crappy Heineken!

[Greg@CapitalCity]

I'm now not sure whether the amount of rental should be based on something comparable using local serviced offices as a guideline (i.e. similar square footage, location, facilities) or alternatively based directly on a percentage of household bills.

Maybe I have misunderstood and have been thinking based on the former not the latter. From the above posts it sounds as if maybe the rental amount should be based on the latter (and should just not exceed commercial rates). The difference is quite a lot - and in fact if the latter, then yes it's probably not worthwhile.

An often forgotten element of this is the personal tax return. If you do decide to proceed with this, you effectively become a landlord to your company with income that must be declared on your personal tax return. Expenses incurred in providing your company with a home office can be offset against the income. To keep things simple, I would suggest charging your company based on actual cost - on your personal tax return the two net each other off giving rise to no increase in personal tax payable. There may of course be reasons for charging your company a commercial rate of rent, the merits of which should be discussed with your accountant.

[bartman]

An often forgotten element of this is the personal tax return. If you do decide to proceed with this, you effectively become a landlord to your company with income that must be declared on your personal tax return. Expenses incurred in providing your company with a home office can be offset against the income. To keep things simple, I would suggest charging your company based on actual cost - on your personal tax return the two net each other off giving rise to no increase in personal tax payable. There may of course be reasons for charging your company a commercial rate of rent, the merits of which should be discussed with your accountant.

Thanks Greg. I think that clarifies for me - I can either claim expenses incurred or a fair commercial rate, both are reasonable although the former is more straightforward. Will discuss with my accountant both options, to see if either make sense for me. Thanks very much for the clarification!

[d000hg]

Is it worth it if you are going to have to delicate rental income on it personally?

Not thinking of charging your limited like 10k a year or something!!?

I think it's worth it in some cases, if you work 100% from home with a proper dedicated office. For instance if you had a 2-room penthouse apartment in London and used one room as your office, that's 50% of floorspace.
If you own a big cheap property in the north, the % is quite low.

I used to expense £100pcm but changed it to £50 simply so it is more obviously inside any kind of calculations someone might want to do.