Reply to: Rented accommodation

[7specialgems]

Hi all,

Looking for some advice. . .

Planning to get a rented accommodation near my current 12 month contract and will be retaining my home (mortgaged).

The girlfriend has an opportunity to work near me (in London) also via her permanent employment (so we can be together during the week) but will not receive expenses via her work.

The question is : if we both use the rented accommodation, will it invalidate my ability to claim it as a business expense via the ltd company?

If I were to add her as a company secretary / employee, would that alter the position?

Cheers, Luke

Renting the pad near your gig is ok if you get a receipt that clarifies that the payments are only for Monday to Friday and you return to your main residence when you're not working (Friday night, weekend).

But that all goes out the window if you've got your better half in there with you and you're effectively living there together for the majority of the week (fails "wholly, exclusively, necessarily" test). If you're doing that and you're renting your main home out, your primary residence becomes the one near your gig and there is no claim to be had.

[SueEllen]

This is a public forum so why not? Try not to get too upset.

From a W&E point of view, the accommodation is temporary for the purposes of contracting.

The fact that the partner works nearby the temporary accommodation won't be ignored by HMRC in their digging.

If the partner worked near the permanent accommodation then it would be.

[eek]

This is a public forum so why not? Try not to get too upset.

From a W&E point of view, the accommodation is temporary for the purposes of contracting.

But probably not on the secondary (is it a base) point once Girlie starts using it...

[cojak]

Yes, this is a public forum, so any readers will just have to read the HMRC website and decide on their own level of risk.

It's not us who have to pick up their tax bill.

[JB3000]

Why do we now have a second poster arguing over a point we've already debated.

This is a public forum so why not? Try not to get too upset.

From a W&E point of view, the accommodation is temporary for the purposes of contracting.

[eek]

In wholly and exclusively cases what matters is the purpose of the expenditure and not the payer’s motive so I am not sure why "intent" would have to be proved. The purpose would be proved by returning to the principal private residence on the weekends and moving out of the temporary accommodation once the contract is over:

BIM37075 - Wholly and exclusively: how to establish purpose: distinction between ?purpose? and ?motive?

Assuming the purpose of the accommodation was for the contract and it is temporary then relief should be permitted in full for the costs actually incurred where the accommodation is of an appropriate standard:

Travel expenses: general: scale of expenditure: accommodation

The fact that his girlfriend stays over does not take away from the purpose of the temporary accommodation which is living closer to the temporary workplace.

Why do we now have a second poster arguing over a point we've already debated. The only question here is when does the second property become (in HMRC eyes) a base.... And remember a base does not have to be 7 days a week it may just be a second home...

[JB3000]

You can say that if you like.

Or, the contractor and his partner now have two permanent residences, a city pad and the country retreat.

The 'intent' is hard to prove. HMRC can just disallow it and then vigorously defend their position at tribunal because of the potential to set a precedent.

In wholly and exclusively cases what matters is the purpose of the expenditure and not the payer’s motive so I am not sure why "intent" would have to be proved. The purpose would be proved by returning to the principal private residence on the weekends and moving out of the temporary accommodation once the contract is over:

BIM37075 - Wholly and exclusively: how to establish purpose: distinction between ?purpose? and ?motive?

Assuming the purpose of the accommodation was for the contract and it is temporary then relief should be permitted in full for the costs actually incurred where the accommodation is of an appropriate standard:

Travel expenses: general: scale of expenditure: accommodation

The fact that his girlfriend stays over does not take away from the purpose of the temporary accommodation which is living closer to the temporary workplace.

[Contreras]

If a contractor is working because of a short term contract, then there is always the expectation that the arrangement is temporary. If a contractor keeps his principal private residence, returns to this on the weekend, then there is a good case for the contractor to argue that the flat is temporary accommodation, because their permanent base is their principal private residence - therefore accommodation and travel expenses would be claimable (in the same way secondment- i.e. working somewhere else temporarily- is claimable).

You can say that if you like.

Or, the contractor and his partner now have two permanent residences, a city pad and the country retreat.

The 'intent' is hard to prove. HMRC can just disallow it and then vigorously defend their position at tribunal because of the potential to set a precedent.

[JB3000]

If the employee is on secondment, then there is always the expectation that the arrangement is temporary. If a contractor moves their family into "temporary" accommodation, then there is a good case for HMRC to argue that it isn't temporary, it's a permanent move because the base has changed - therefore accommodation and travel expenses would not be claimable.

If a contractor is working because of a short term contract, then there is always the expectation that the arrangement is temporary. If a contractor keeps his principal private residence, returns to this on the weekend, then there is a good case for the contractor to argue that the flat is temporary accommodation, because their permanent base is their principal private residence - therefore accommodation and travel expenses would be claimable (in the same way secondment- i.e. working somewhere else temporarily- is claimable).

[TheFaQQer]

Relevant links for anyone who is interested:

Travel expenses: general: scale of expenditure: accommodation

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

It does appear that, assuming a one bed flat is being rented whilst the main residence is being kept, relief should be permitted in full for the costs actually incurred. This appears to be in keeping with S.338, ITEPA 2003 and HMRC guidance, i.e. no income tax and Class 1A NIC would be due on the cost of the temporary accommodation.

The key word being "temporary".

[TheFaQQer]

Was looking into this. . .

Found the following example on HMRC website:

# # #
Example 3
An employee of a German company is on secondment at a temporary workplace in the UK for 18 months. She is provided with a four bedroom house for herself, her husband and two children. A single employee in equivalent circumstances would only have been provided by her employer with a two bedroom flat.

On these facts part of what the employer provides is not a necessary expense attributable to the travel by the employee. Part of the accommodation is attributable to the accompanying family. Relief should be limited to the provision of a two bedroom flat, see EIM31836.

# # #

So having family in the rented Accom did not deem it an inappropriate expenses, but rather any cost above that required solely for business should be excluded from the tax relief. Thus : assuming the accommodation is appropriate for an individual, is temporary and the primary home is retained, I see no reason why HMRC would care if the girlfriend also makes use of the accommodation.

Just a point of view.

If the employee is on secondment, then there is always the expectation that the arrangement is temporary. If a contractor moves their family into "temporary" accommodation, then there is a good case for HMRC to argue that it isn't temporary, it's a permanent move because the base has changed - therefore accommodation and travel expenses would not be claimable.

[JB3000]

Links

Was looking into this. . .

Found the following example on HMRC website:

# # #
Example 3
An employee of a German company is on secondment at a temporary workplace in the UK for 18 months. She is provided with a four bedroom house for herself, her husband and two children. A single employee in equivalent circumstances would only have been provided by her employer with a two bedroom flat.

On these facts part of what the employer provides is not a necessary expense attributable to the travel by the employee. Part of the accommodation is attributable to the accompanying family. Relief should be limited to the provision of a two bedroom flat, see EIM31836.

# # #

So having family in the rented Accom did not deem it an inappropriate expenses, but rather any cost above that required solely for business should be excluded from the tax relief. Thus : assuming the accommodation is appropriate for an individual, is temporary and the primary home is retained, I see no reason why HMRC would care if the girlfriend also makes use of the accommodation.

Just a point of view.

Relevant links for anyone who is interested:

Travel expenses: general: scale of expenditure: accommodation

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

It does appear that, assuming a one bed flat is being rented whilst the main residence is being kept, relief should be permitted in full for the costs actually incurred. This appears to be in keeping with S.338, ITEPA 2003 and HMRC guidance, i.e. no income tax and Class 1A NIC would be due on the cost of the temporary accommodation.

[Beansontoast]

Was looking into this. . .

Found the following example on HMRC website:

# # #
Example 3
An employee of a German company is on secondment at a temporary workplace in the UK for 18 months. She is provided with a four bedroom house for herself, her husband and two children. A single employee in equivalent circumstances would only have been provided by her employer with a two bedroom flat.

On these facts part of what the employer provides is not a necessary expense attributable to the travel by the employee. Part of the accommodation is attributable to the accompanying family. Relief should be limited to the provision of a two bedroom flat, see EIM31836.

# # #

So having family in the rented Accom did not deem it an inappropriate expenses, but rather any cost above that required solely for business should be excluded from the tax relief. Thus : assuming the accommodation is appropriate for an individual, is temporary and the primary home is retained, I see no reason why HMRC would care if the girlfriend also makes use of the accommodation.

Just a point of view.

[northernladuk]

Must have hit a nerve, for all of you to come down crashing over me. It wasn't my intention to offend anyone, so please accept my apologies.

Not hitting a nerve, just hard nosed discussion. Can't see why you think taking a gung ho attitude to expenses when trying to help a newbie isn't going to attract some tough attention though.

Personal observation and opinion based on conversation with other contractors. Mostly breaching the 24m rule when it comes to travel/meals expenses.
YMMV

Oddly enough I find exactly the opposite is true. Nearly everyone I know is happy to stick to the 24 month rule. Plenty of other stuff they fly close to the wind with and I don't always agree but still, I don't find the same as you at all. There are those that don't understand it I agree but they don't consciously go out to breach it.

And we are supposed to take these fact and figures in to account based on that?
Now back to the original topic. I can't see why having his GF over is going to be disallowed.

The OP clearly states that it's a 12m contract that will require for him to get a temporary accommodation in London, while retaining his home. If it wasn't for the said contract he wouldn't have the need to rent the said accommodation - here is your wholly and exclusively. He is not renting the flat so he can spend nights at the West End, nor for his GF to have place to live in London. The purpose is to allow him to work on the contract.

He doesn't say she is staying over. She will be using it as her base location to do her permanent job.

So in this case the added benefit of spending a weekend over in London using the accommodation or having his GF staying over is an incidental added benefit of renting the accommodation, not the reason.

Case law where people were found guilty for renting larger hotel rooms to accommodate family members IMO don't apply here as large room is more expensive than small room. Where 12m flat rent is much cheaper than hotel and makes business sense.

Maybe you need to re-think your opinions. You don't think case law applies just because something is cheaper? Just Ludicrous. HMRC and legislation don't do business sense.

You are also missing all the previous comments, particularly the one in NW's guides saying don't take family. They aren't saying that just to pad their brochure out a bit.

[eek]

Must have hit a nerve, for all of you to come down crashing over me. It wasn't my intention to offend anyone, so please accept my apologies.

No you didn't hit a nerve, I was merely stating where our viewpoint comes from

Now back to the original topic. I can't see why having his GF over is going to be disallowed.

The OP clearly states that it's a 12m contract that will require for him to get a temporary accommodation in London, while retaining his home. If it wasn't for the said contract he wouldn't have the need to rent the said accommodation - here is your wholly and exclusively. He is not renting the flat so he can spend nights at the West End, nor for his GF to have place to live in London. The purpose is to allow him to work on the contract.



So in this case the added benefit of spending a weekend over in London using the accommodation or having his GF staying over is an incidental added benefit of renting the accommodation, not the reason.

Case law where people were found guilty for renting larger hotel rooms to accommodate family members IMO don't apply here as large room is more expensive than small room. Where 12m flat rent is much cheaper than hotel and makes business sense.

That being said i would advise the OP to consult with experts on the matter, as the area is a bit grey.

You utterly ignore the second criteria HMRC use which is that if a location becomes a "base" expenses are no longer claimable. And girlie changing work location to London is going to make arguing that second point impossible.....