Reply to: Advice on paying rent whilst on a contract away from business address

[Contreras]

Point your accountant at this and see what they have to say:

In many cases furnished or unfurnished accommodation is obtained as a cheaper and more convenient alternative to hotel accommodation. Provided that the total cost of the accommodation is appropriate to the business need and is reasonable and not excessive you should permit relief in full. The total cost may include the reasonable cost of furniture where that is properly attributable to the business travel. The cost should be accepted as reasonable where the total cost of providing accommodation does not exceed the cost of hotel accommodation of an appropriate standard. You should only restrict relief in extreme cases.

You may need to restrict relief in those cases where the standard of accommodation provided does not result from the need to provide the employee with necessary accommodation while at a temporary workplace. For example, if accommodation is supplied in part because the employee is accompanied by his or her family, or the location of the accommodation is determined by reasons of non-business convenience and there is an increase in costs as a result, relief ought to be restricted. It cannot be assumed that accommodation of a similar standard to the employee's home will always be reasonable.

Relief should not be restricted for furnished or unfurnished accommodation that is of reasonable cost where it is also able to be used by the employee for weekends, short holidays during the period of work at the temporary workplace, or other short non- working periods. Relief should be restricted where significant non-business use is part of the purpose of providing the accommodation.

Linky here - Travel expenses: general: scale of expenditure: accommodation

ps. Clare, the link you posted is broken.

[Wanderer]

http://www.hmrc.gov.uk/helpsheets/hs202.pdf
Page 2 states that most company directors cannot claim exemption.
so, i'm back to square one and not sure if I can claim part, all or none of my rent.

My home is cheltenham, my contract is in london so i have rented a place here that i often stay at over the weekends.

My reading of the reference you give is that it applies when a company provides accommodation which is the main or only residence for the employee.

Provided you still have your primary residence (ie, you haven't rented it out or something) then you can claim that this is just a temporary accommodation for use while working in London. Even if you stay there the odd weekend, you could potentially argue that this weekend use is merely incidental to the business use.

Having your girlfriend living there with you might be problematic though.

[darrylmg]

My home is cheltenham, my contract is in london

I live in Cheltenham to (when I'm not working abroad).
If I get a contract in London next year, I'll give you a shout.
If we boot out your other half, we can split the travel costs and the rent...

[TheFaQQer]

My home is cheltenham, my contract is in london so i have rented a place here that i often stay at over the weekends. My girlfriend lives with me, but she is studying so not working.

Is it wholly and exclusively for the business and has no personal benefit?

Doesn't sound like it to me, so it's not a business expense. If it was just you, then you could pro-rata the personal use and claim 4/7 for the nights you need it for work, but since your girlfriend is also there I can't see how you could justify it as wholly a business expense.

[Ken Adams]

still confused...

hi all,

i'm looking into this at the moment and whilst the above links seems to suggest my rent can be exempt from tax, i have found this article on HMRC's website:

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

Page 2 states that most company directors cannot claim exemption.

so, i'm back to square one and not sure if I can claim part, all or none of my rent.

My home is cheltenham, my contract is in london so i have rented a place here that i often stay at over the weekends. My girlfriend lives with me, but she is studying so not working.

any advice would really help

thanks

[Clare@InTouch]

I would agree with Blacjac. If you're using it purely for business, and the only reason you're renting it is to be close enough to the client site to do the job, then it's business related and allowable.

If you're renting it so that you have a bolt hole in the City and you use it for personal reasons such as somewhere to stay after a night out on the town then I'd see the point about it being a benefit in kind.

[blacjac]

I would say you are not using it as a pied à terre, so your accountant is wrong. Not based in Wakefield by any chance is he?

Dictionary of Difficult Words - pied-à-terre

[ribble]

Deduction for business expenses
Deduction for business expenses

21.23 Where the accommodation provided is simply a home for the employee and his or her family,
the question of any deduction under the expenses rule described in Chapter 7 does not arise.
Where the employee is necessarily obliged to use part of the property exclusively for business,
the expense of such use may be deducted in arriving at the tax charge. For example, there may
be circumstances in which part of the accommodation has to be reserved for business purposes,
such as a showroom. In these cases, an appropriate deduction may be given for tax purposes.

21.24 If accommodation is provided for an employee, for example, in a flat or hotel, while the employee
is on business duties away from his or her home and normal place of work, the cost of this may
be allowable as a deduction under the expenses rule. For example, a company in Yorkshire may
rent a London flat for an employee who has to make frequent business trips to London. The extent
of any deduction will depend upon the circumstances. If the accommodation is no more than an
alternative to hotel accommodation and is not available for private occupation the whole cost
of renting and running the flat may be allowed as a deduction. On the other hand, if the employee
or his or her family also had the use of the flat as a private residence any allowance would
be restricted.

21.25 If, however, a London flat is provided for an employee whose job is in London and the flat is
used by the employee as a pied à terre no allowance would be due. Equally, if the flat is used
by the employee or the employee’s family as their only or second home, no deduction for tax
purposes would be due.

Apparently its the last paragraph from here thats relivant http://www.hmrc.gov.uk/guidance/480_chapter21.pdf

Anyone care to comment?

[ribble]

Just doing that now.... didn't feel quite right but wanted to check my facts first...

[Clare@InTouch]

It is room that I rent for 4 nights a week rather than staying in a hotel. I am only in London due to working on this contract and accommodation is necessary as my principle residence is in Devon. Definitely a temporary workplace – not hit anywhere near 24 months total in the London area so far.

Have you questioned your accountant, and mentioned the facts? What did he say?

[ribble]

Is it a second home, rented purely for business reasons? You have a principle residence elsewhere? No private element to the London residence at all? It's a temporary workplace? If yes to all, then I'd question why it's a benefit in kind on the basis of the accommodation being necessary for you to do the job. From HMRC:

Accommodation you can provide free of tax and NICs

If any of the following conditions apply to accommodation you provide to an employee, then you don’t have to report the benefit or pay tax or NICs on it:

the living accommodation is provided because of a domestic or personal relationship rather than an employment one - for example, if your son or daughter works for your business
the accommodation is provided by a local authority on the same terms that housing is provided to non-employees

it's necessary for the employee to live there to be able to do their work properly - for example, agricultural workers living on farms and full-time caretakers who are on call outside normal working hours

it's customary to provide accommodation so the employee can do their work better - for example, ministers of religion, members of the armed forces and pub managers living on the premises
there's a special threat to the employee's security and they have to live in the provided accommodation as part of arrangements for their personal security

HM Revenue & Customs: Living accommodation

It is room that I rent for 4 nights a week rather than staying in a hotel. I am only in London due to working on this contract and accommodation is necessary as my principle residence is in Devon. Definitely a temporary workplace – not hit anywhere near 24 months total in the London area so far.

[Clare@InTouch]

I'm currently paying rent (£600 / month) to a private landlord from my company as an expense for living in London during the week.

I have just spoken to my accountant regarding my P11d who is saying that my rental need to be declared and I will need to pay a BIK on the amount as it is a benefit to me provided by the company. I didn't think that this would be the case and would be treat like a hotel.

Can anybody shed any light?

Is it a second home, rented purely for business reasons? You have a principle residence elsewhere? No private element to the London residence at all? It's a temporary workplace? If yes to all, then I'd question why it's a benefit in kind on the basis of the accommodation being necessary for you to do the job. From HMRC:

Accommodation you can provide free of tax and NICs

If any of the following conditions apply to accommodation you provide to an employee, then you don’t have to report the benefit or pay tax or NICs on it:

the living accommodation is provided because of a domestic or personal relationship rather than an employment one - for example, if your son or daughter works for your business
the accommodation is provided by a local authority on the same terms that housing is provided to non-employees

it's necessary for the employee to live there to be able to do their work properly - for example, agricultural workers living on farms and full-time caretakers who are on call outside normal working hours

it's customary to provide accommodation so the employee can do their work better - for example, ministers of religion, members of the armed forces and pub managers living on the premises
there's a special threat to the employee's security and they have to live in the provided accommodation as part of arrangements for their personal security

HM Revenue & Customs: Living accommodation

[ribble]

I'm currently paying rent (£600 / month) to a private landlord from my company as an expense for living in London during the week.

I have just spoken to my accountant regarding my P11d who is saying that my rental need to be declared and I will need to pay a BIK on the amount as it is a benefit to me provided by the company. I didn't think that this would be the case and would be treated just like a hotel.

Can anybody shed any light?

[BolshieBastard]

Get it in your company's name. Even if you dont, there's no problem.

I did this a couple of times when working away for a couple of years. Beats hotels any day of the week.

[ASB]

Hi

Quick question I will shortly be on a short-term contract living away from home. My home is my business address. I will be living in rented accommodation during weekdays only. Can i pay for the rent directly through my limited company bank account? or do I have to pay for it through my own pocket and then claim it back as a business expense from my company? All my contracts have been local so far so iv been commuting from home so im not too sure how to do this.

Thanks in advance

Make sure you get the right sort of tenancy. If you are the tenant then it should be an AST which should have a minimum term of 6 months. If it's let to the company then different rules apply.

Information Sheets | ARLA

In the case of the company let there may be vat complications (it could potentially need vat charging). A thread to get you started.

Tax Tips Forum :: Free Tax Advice • VAT on rent : General

The VAT should be netral in that it should be reclaimable, but not if you are on the FRS.

Ultimately you should be able to expense the rent but if the family come to star or whatever you may wish to consider the potential BIK.