rental expense

[JB3000]

I have am about to start contracting and have a query on a rental expense.

I live in my parents house. They have no mortgage. My mum is retired and my dad works abroad and is registered as non-resident so does not pay UK tax.

I pay my mum £400 per month for use of their spare room to run the business from (with computer, desk and company related documents) and use of the house address as the company trading address. Are there any issues with claiming this monthly expense as rental of a room to run the company from? I expect to be buying my own propertly to move into in about a year's time anyway so this would probably only be until around this time next year, after which I would look to use a room in my own property and claim the relevant expenses from that instead. I don't think £400 per month is particularly large, it is below what a room would usually cost to rent in this area.

Only where the substantive duties of the contract are being performed from home (as opposed to the end client's premises) should a claim of more than £4/week be considered:

EIM32800 - Other expenses: home: working from home: service companies

Where the substantive duties are being conducted from home your claim could be greater than £4/week by claiming the marginal increase in gas, electric and metered water.

You won't be able to get relief on domestic expenses that you're paying anyway - like your mortgage or council tax. You also won't be able to get relief for expenses that relate to both business and private use - such as your telephone line rental, or internet access:

HM Revenue & Customs: Tax relief for household expenses when working at home

[Martin at NixonWilliams]

I assume you live with your parents? If so I think this would be very hard to justify, it sounds as though this is the board you pay to your parents, or is the £400 in addition to that?

It's a while since I lived at home but if my mum asked for £400 to work from the spare room she would have lost a son!

[GillsMan]

You can only claim expenses that you are incurring wholly and exclusively for business purposes. Presumably you live with your parents and go out to work at a temporary workplace (i.e. the end client's premise). In such an instance, the expenditure incurred on room that you live in is personal expenditure (i.e. it is for residential purposes, you would need somewhere to live regardless of whether or not you had a contract) and therefore cannot be claimed.

If you did what to claim a hassle-free small amount for use of home as an office you could claim £4/week (i.e. £17.50/month).

You are somewhat correct, but wrong in your assessment that the OP cannot claim on the basis that the room he lives in is personal expenditure. However, some of your other points are good.

The OP needs to consider:

1. Do you work from home most of the time, or do you go on site most of the time? If you're usually on site, then this claim will be taking the piss. If you're usually WFH, there's no reason you can't claim more than the £4/week.
2. If you do claim, you actually want the room to have a duality of purpose (e.g. a sofa/spare bed in there), to avoid the Council claiming business rates.
3. In terms of the cost, £400 seems high. If you've compared other rents, are those serviced offices? Have you factored in the fact you won't be getting the same service? How much is your room size? I do think £400 is taking the piss, but there's no reason you can't claim more than the £4/week if you're genuinely WFH most of the time.

You'll need to document your claim, evidence of comparable rates, etc. Paying £400 to your mum to live at home and run your business is unlikely to fly, so ask your accountant. You have one of those, right?

[JB3000]

May fail the wholly and exclusively test

I have am about to start contracting and have a query on a rental expense.

I live in my parents house. They have no mortgage. My mum is retired and my dad works abroad and is registered as non-resident so does not pay UK tax.

I pay my mum £400 per month for use of their spare room to run the business from (with computer, desk and company related documents) and use of the house address as the company trading address. Are there any issues with claiming this monthly expense as rental of a room to run the company from? I expect to be buying my own propertly to move into in about a year's time anyway so this would probably only be until around this time next year, after which I would look to use a room in my own property and claim the relevant expenses from that instead. I don't think £400 per month is particularly large, it is below what a room would usually cost to rent in this area.

You can only claim expenses that you are incurring wholly and exclusively for business purposes. Presumably you live with your parents and go out to work at a temporary workplace (i.e. the end client's premise). In such an instance, the expenditure incurred on room that you live in is personal expenditure (i.e. it is for residential purposes, you would need somewhere to live regardless of whether or not you had a contract) and therefore cannot be claimed.

If you did what to claim a hassle-free small amount for use of home as an office you could claim £4/week (i.e. £17.50/month).

[northernladuk]

Oh and get an accountant. ;-)

[northernladuk]

HMRC are going to take a pretty dim view of someone paying their mum 400 a month to rent a room in a house they already live in. Sounds highly suss. You are only saving 20% on it anyway so no not really saving much. Just claim the amount allowed by HMRC and forget this idea IMO.

[ewokuk]

I have am about to start contracting and have a query on a rental expense.

I live in my parents house. They have no mortgage. My mum is retired and my dad works abroad and is registered as non-resident so does not pay UK tax.

I pay my mum £400 per month for use of their spare room to run the business from (with computer, desk and company related documents) and use of the house address as the company trading address. Are there any issues with claiming this monthly expense as rental of a room to run the company from? I expect to be buying my own propertly to move into in about a year's time anyway so this would probably only be until around this time next year, after which I would look to use a room in my own property and claim the relevant expenses from that instead. I don't think £400 per month is particularly large, it is below what a room would usually cost to rent in this area.