Reply to: Shared expense between limited and sole trader

[TheCyclingProgrammer]

£6 a week from April 2020 isn't it?

Yes, indeed.

[northernladuk]

( OP is having a laugh. )

Hate to think what else he's claimed up to now. I'd guess the coffee cup he's drinking out of right now is part owned by his LTD/Sole trader setups as well.

[jamesbrown]

£4/week

That was boosted to a spectacular £6/week in 2020-21, woohooo.

( OP is having a laugh. )

[northernladuk]

employees can only claim £4/week or additional costs (with evidence) whereas sole traders can work out a reasonable proportion of their household costs according to the number of rooms and percentage of time using the room for business.

£6 a week from April 2020 isn't it?

[TheCyclingProgrammer]

The rules for claiming use of home expenses for the self employed are more generous than those for employees so I would claim expenses for that against your sole trader business - employees can only claim £4/week or additional costs (with evidence) whereas sole traders can work out a reasonable proportion of their household costs according to the number of rooms and percentage of time using the room for business.

(Directors/employees can achieve a similar saving by going down the renting to your company route but why go through that faff when you don’t need to?).

[Abbot]

As an accountant this is one of the few areas where if I am across the table from a potential client and this is the kind of stuff they say then it’s better to pass on it and file in the ‘life’s too short’ folder.

This most certainly is one of the areas where a person thinks they have a great idea but don’t actually follow through. I personally find a sole trader wanting to do this as ridiculous. As NLUK points out, this is not eligible for rent a room relief, and therefore goes onto the SATR as income. Reducing trading profit in one part of the SATR to increase rental income in another is pointless. Sure the two are in different parts of the SATR but what is the material advantage of doing this?

For the Limited company, you reduce your distributable reserves by the amount of the rent, your corporation tax liability by rent x corporation rate and increase your SATR by the amount of the rent. It’s worth considering this as we have various tax rates in play and what a person might think is clever might actually be detrimental.

My views on this are usually not taken well but IMO HMRC have an allowance for working from home. Other than workspace and permissible equipment specifically listed by HMRC, I don’t personally believe that stuff like hoovers, heaters etc are not permissible as they aren’t wholly and exclusively for business as they are in a person’s residence. However, again I file this in the ‘life’s too short’ folder, outside of my own clients I don’t really pay too much attention to this kind of thing.

[northernladuk]

With the rent, I assume I can just figure out a percentage and accordingly split per legal entity and contract.

If you were thinking about doing it through the rent a room scheme as well... You can't.

https://www.gov.uk/hmrc-internal-man...manual/pim4002

Extract from TBK12


“There have been some suggestions in the professional press that relief could be available where a residence, or part of a residence, is used as an office or for other trade or business purposes (other than the business of providing furnished living accommodation) and sums are paid in respect of that use. We take the view that such claims are inadmissible since:

• the words of the legislation, in our opinion, do not permit such claims, and
• the legislation was never intended to give relief in such circumstances.

Where a room is used exclusively as an office or as other trade or business premises, it is no longer occupied or intended to be occupied as a separate residence - one of the conditions for rent-a-room relief. As such, it is no longer, for rent-a-room purposes, part of the ‘residence’ because F2A92/SCH10/PARA7 permits the identification of parts of buildings which are occupied or intended to be occupied as a residence.

[northernladuk]

Well I need a vacuum cleaner anyway. But I thought that I could maybe save some money since I will use it to clean my office room too. Might be a small expense but since I'm moving to a bigger place, I could probably do the same for any such shared items.

No you can't. Just use the flat rate amount like everyone else and be done.

If you use the room for anything else but LTD business it becomes dual use so again fails the wholly and exclusively rules.

It's not free, it's small amounts of money that is discounted because of tax and nothing more so it's going to be pretty insignificant but open you to investigation and if this is your approach to your tax affairs I'm sure you don't want that.

Rule of thumb for LTD expenses again. It has to be wholly and exclusively for the purpose of the business.

EDIT : I'm sure someone will come along and point out you can actually buy anything you want through the company but it will incurr BiK so really not worth it.

[northernladuk]

My understanding is that it doesn't have to be exclusive, no? So if I have 2 rooms to clean, I was thinking to split the cost 50% between limited and personal usage.

You would likely be wrong then. An expense has to be wholly and exclusively for the purpose of business to count. Some exceptions like phones. A vacuum cleaner is just taking the piss.

With the rent what I did as sole trader was to calculate how much time I spent in 1 room working per year and use that as an expense. By googling around that seemed like an ok thing to do..

I also googled that some people insert things in to their willys for fun but it doesn't seem like an OK thing to do.

It probably is when you've got a severe case of selective reading. There are caveats, one being you cant rent a room in an already let flat as your tenancy won't allow it and it's also not as clear cut as that. It needs a rental agreement and all sorts. Nearly all of us on here don't do this and instead use a flat rate alternative.

https://www.gov.uk/simpler-income-ta...king-from-home

[MonkeyDonkey]

Why don’t you assign it all to one or
the other? If it’s use of hone as office, the amounts you’re talking about are tiny anyway.

also a vacuum cleaner only for the home office? Are you serious?

Well I need a vacuum cleaner anyway. But I thought that I could maybe save some money since I will use it to clean my office room too. Might be a small expense but since I'm moving to a bigger place, I could probably do the same for any such shared items.

[MonkeyDonkey]

Thought you were going Inside via an Umbrella so no expenses allowed at all.

True but I'm planning to be working on my own projects on weekends for example and maybe very small contracts outside, not sure yet

[MonkeyDonkey]

Shared vacuum cleaner? You are taking the piss aren't you? It will have considerable personal use so is not wholly and exclusively so it's not claimable at all.

Also if you are splitting the rent and the LTD is paying then you are sub letting your home which I am pretty sure isn't allowed in your tenancy.

Speak to your accountant before you get in a right mess.

My understanding is that it doesn't have to be exclusive, no? So if I have 2 rooms to clean, I was thinking to split the cost 50% between limited and personal usage.

With the rent what I did as sole trader was to calculate how much time I spent in 1 room working per year and use that as an expense. By googling around that seemed like an ok thing to do..

[Abbot]

Why don’t you assign it all to one or
the other? If it’s use of hone as office, the amounts you’re talking about are tiny anyway.

also a vacuum cleaner only for the home office? Are you serious?

It looks like OP actually wants to charge rent.

[northernladuk]

Thought you were going Inside via an Umbrella so no expenses allowed at all.

[northernladuk]

Say that I use my home office for both my Ltd endeavours but also some as a sole trader and other hustles.

With the rent, I assume I can just figure out a percentage and accordingly split per legal entity and contract. But what if I was to buy a shared hardware like a vacuum cleaner for the office? Who takes the bill and how is the expense propagated correctly?

Shared vacuum cleaner? You are taking the piss aren't you? It will have considerable personal use so is not wholly and exclusively so it's not claimable at all.

Also if you are splitting the rent and the LTD is paying then you are sub letting your home which I am pretty sure isn't allowed in your tenancy.

Speak to your accountant before you get in a right mess.