Reply to: Renting two properties - Can I claim rent in full for one property?

[Greg@CapitalCity]

I have taken two bedroom property because I was unable to find one bedroom property. moreover it is costing the same as one bedroom property as I have got a good deal from the landloard. Do I need to get the rental terms changed so that it reflects that I am allowed to use this property for business purpose ?

OK - just keep some records to show that this is the case. I assume you are just living in the flat, and working somewhere else? No need to get the rental terms changed in my view.

I see no tax benefit in paying for the flat, or associated costs, from the business bank account, but it may help with your administration. It will make no difference to tax deductibility in this case - either your trip to Edinburgh is business travel (so claim accommodation costs), or its not (in which case don't).

If your family do decide to live with you, the accommodation costs can still be claimed, but you may face a P11D charge. Ask your accountant to work this one out for you.

[philip@wellwoodhoyle]

How does in this case someone can prove that my family is staying with me in Edinburgh at first place ?

Be VERY wary of lying - it's a very slippery slope and you end up digging yourself deeper and the penalties increase for dishonesty rather than negligence!

Should a tax inspector be so inclined, he could ask to see your utility bills for London to check how much power and water was used in London during the time you were living in Edinburgh claiming your family remained in London. A sudden dip in utility usage gives the game away. Similarly, presumably your wife's debit and credit cards will be being used in Edinburgh shops and not London shops for that period. How about council tax - what declarations have you made re both London and Edinburgh as to who is living in each property? What about schools or childcare? Lots of evidence and paper trails for the tax man to make his own assumptions.

And no, this isn't far fetched. There was a recent case involving a guy who claimed he was living in a house as his principal residence whilst he renovated it. Tax inspector picked up the very low utility bills which basically proved he was using barely any power nor water, so effectively he couldn't have been living in it as the utility usage wasn't enough to cook his meals nor even wash himself!

[rd409]

Weather is being bad so my family is planning to stay in London instead of Edinburgh and I will move to London in 2-3 months time and will keep on travelling over weekends to London.

Can I claim the rent in full on Edinburgh property if I am living alone and my family is staying in London ?

The question is not whether your family is with you or not. The question, is whether renting this flat is a business necessity. As said earlier by NLUK, if the new flat is of lower spec than your permenant/main residence, then it should be okay. HMRC cannot expect you to put your family in hotel if they come to visit you during a weekend. Also you dont have to document this as well. What you should focus on is (1) You have a main residence in London. (2) You secured a new gig in Edinburgh. (3) It is cheaper for you to rent out a flat for 3 months, rather than staying in hotels for that duration. (4) You do not intend to make this as your permanent residence.

Putting down the rental agreement in business name just asserts that this rental is for business purpose only. I am not sure, if you want to pay the rent and other expenses from business account directly, but you can always pay from your pocket, and then claim it back as expenses.

HTH.
Dave.

[NoviceContractor]

Well the whole idea of claiming the rent and expenses assumes, that the flat is only for you and rented for you to do a job. If you put your family residence on paper, then you cannot claim for the rent, as there is a duality of purpose.

HTH.

Weather is being bad so my family is planning to stay in London instead of Edinburgh and I will move to London in 2-3 months time and will keep on travelling over weekends to London.

Can I claim the rent in full on Edinburgh property if I am living alone and my family is staying in London ?

[rd409]

Can't HMRC question me if I rent on my company name and live in the flat wih my family?
Also, in this case, shall I pay all the bills(council, gas, electricity, landline, broadband) straight from my business?

Thanks.

Well the whole idea of claiming the rent and expenses assumes, that the flat is only for you and rented for you to do a job. If you put your family residence on paper, then you cannot claim for the rent, as there is a duality of purpose.

HTH.

[NoviceContractor]

I guess, taking the flat in the name of the ltd company, and paying the rent straight from the company account would be the best way forward.

Can't HMRC question me if I rent on my company name and live in the flat wih my family?
Also, in this case, shall I pay all the bills(council, gas, electricity, landline, broadband) straight from my business?

Thanks.

[rd409]

I have taken two bedroom property because I was unable to find one bedroom property. moreover it is costing the same as one bedroom property as I have got a good deal from the landloard.
Do I need to get the rental terms changed so that it reflects that I am allowed to use this property for business purpose ?

Thanks.

I guess, taking the flat in the name of the ltd company, and paying the rent straight from the company account would be the best way forward.

[NoviceContractor]

I have taken two bedroom property because I was unable to find one bedroom property. moreover it is costing the same as one bedroom property as I have got a good deal from the landloard.
Do I need to get the rental terms changed so that it reflects that I am allowed to use this property for business purpose ?

Thanks.

[Greg@CapitalCity]

He lives in it 2 days at weekends which are not work days so how can he claim that?

If there is a genuine business purpose, then normally the HMRC take a common-sense approach and look at cost. If a flat costs £1,000 a month, and a hotel costs £1,100 for 20 nights, although the contractor has use of the flat at weekends, its not actually costing the HMRC in lost tax because the alternative gets about the same deduction. It always pays to do your homework in this area, and show you have considered hotel accommodation when taking a flat, if only to prove the flat is similar or cheaper than the hotel accommodation.

[Greg@CapitalCity]

I think you need to decide why you are living in Edinburgh. As this thread has progressed it sounds more likely that you are relocating up there, while also keeping a house in London. Its fine to have two properties, but making Edinburgh your home for six months means you won't be able to claim the accommodation through your business as the trip from London to Edinburgh is no longer a business trip - its just you moving between the two properties that you rent, where you live. In which case the only travel/subsistence costs you could claim would be from your Edinburgh property, to your temporary workplace in Edinburgh.

If you do decide London to Edinburgh is purely a business trip, then claim all relevant subsistence, accommodation costs etc. The accommodation must be reasonable for the business purpose - for you, this probably means a one bedroom flat. As you have a two bed property to accommodate the family as well, then a P11D charge will apply. Likewise with electricity, gas, subsistence etc. All these costs will include for the family, not just you. So again, more P11D charges for you.

Take a look at paragraph 21.24 of www.hmrc.gov.uk/guidance/480.pdf

[NoviceContractor]

I presume the further questions about how do they know abour your family you are looking at trying to evade paying what your are supposed to by not claiming it. Good luck with that, on your head be it.

If you are relocating your family to Edinburgh, which it appears you are doing then fine. If you want to keep paying the rent on the flat in London because you would like to keep it, also fine. To reclaim the Edinburgh flat just so you can keep the London on is not fine. Keep your nose clean and pay/claim what is due, not what suits your schemes.

Personally I don't think the attitude of how do I hide the fact my family is there and what is the worst that will happen to me if I try and screw HMRC over is the correct one. The wording in RD409's mail is correct, but I don't think it gives the right impression of what will happen to you when it all goes wrong. You are talking about £1K per month for 6 months with increased costs they will want back of you pretty pronto. If you can keep that kind of money in your bank for that rainy day then fine but most people don't and will be in a whole heap of trouble when a 10K tax bill hits the floor.

Pay/claim what you are supposed to, keep your nose clean and let you (and your family) sleep soundly at night.

Appreciate your thought but I am not trying to evade the tax liability. I am not keeping the London flat just to claim the Edinburgh flat rent.It does not make sense to pay extra £ 700 to save some 100-200 odd pounds per month in tax. I am keeping the London flat because I want to go back to London and work there.
I am paying £485 in Edinburgh and £700 in London. I am not trying to hide my family being in the Edinburgh rather I am not showing that they are in Edinburgh.
Anyway, even if it is clear that they are staying with me, we can not deny the fact that I am paying the rent for two properties and I should be able to claim back the rent or proportion of it legitimately rather then evading the tax.

How much do you think is legitimate for me to claim (considering my family in Edinburgh)? Could you point me to some HMRC guidance/ docs that I can read and take informed decision ?

Thanks.

[northernladuk]

I presume the further questions about how do they know abour your family you are looking at trying to evade paying what your are supposed to by not claiming it. Good luck with that, on your head be it.

If you are relocating your family to Edinburgh, which it appears you are doing then fine. If you want to keep paying the rent on the flat in London because you would like to keep it, also fine. To reclaim the Edinburgh flat just so you can keep the London on is not fine. Keep your nose clean and pay/claim what is due, not what suits your schemes.

Personally I don't think the attitude of how do I hide the fact my family is there and what is the worst that will happen to me if I try and screw HMRC over is the correct one. The wording in RD409's mail is correct, but I don't think it gives the right impression of what will happen to you when it all goes wrong. You are talking about £1K per month for 6 months with increased costs they will want back of you pretty pronto. If you can keep that kind of money in your bank for that rainy day then fine but most people don't and will be in a whole heap of trouble when a 10K tax bill hits the floor.

Pay/claim what you are supposed to, keep your nose clean and let you (and your family) sleep soundly at night.

[NoviceContractor]

IANAL = I Am Not A Lawyer.
IANAA = I Am Not An Accountant.
(This is to warn, that the advice comes from a fellow contractor, and not a professional)

The penalty used to be capped at 100% of the total tax due, but not any more. It usually depends on the Tax Inspector, but I have not had any encounters, so I am not sure how this works. Your accountant might be in a good position to estimate. Interest on the tax and penalty, is usually quoted on HMRC websites, you can google that easily.

I think you can claim for most of the utilities, but I am not sure about the council tax. If you are working away from home (permanent base), you can claim subsistence. Most of the accountant do not require receipts for the later, but I would advise to keep them, just in case. It shows the business follows good practice.


HTH (Hope that Helps).
Dave.

Thanks dave.

Regards,

[rd409]

Thanks for your reply.

What is IANAL/IANAA ?
What can be the penalty ? Any idea based on what you have seen earlier .

Can I also claim for gas, electricity, council tax, phone, broadband, daily food, substinance(£ 5 per day), etc...? If yes, is there any limit on how much I can clami for each of these type of expenses ?

Thanks.

IANAL = I Am Not A Lawyer.
IANAA = I Am Not An Accountant.
(This is to warn, that the advice comes from a fellow contractor, and not a professional)

The penalty used to be capped at 100% of the total tax due, but not any more. It usually depends on the Tax Inspector, but I have not had any encounters, so I am not sure how this works. Your accountant might be in a good position to estimate. Interest on the tax and penalty, is usually quoted on HMRC websites, you can google that easily.

I think you can claim for most of the utilities, but I am not sure about the council tax. If you are working away from home (permanent base), you can claim subsistence. Most of the accountant do not require receipts for the later, but I would advise to keep them, just in case. It shows the business follows good practice.

HTH (Hope that Helps).
Dave.

[NoviceContractor]

The risk is only if you are audited for PAYE. I think with HMRC, you are guilty unless proven innocent, so if the stint is for shorter term, then you can claim that it was a wiser decision to stay in a flat rather than hotel. There was some discussion regarding whether having an access to kitchen affects the claim, but is a grey area, so dont worry about it atm.

If HMRC investigates, the worst that happens, is the entire amount is classed as salary/income, so you pay tax + penalty + interest on it.

As per the other information, it would be easier for you to prove, that your family was based in London, and you were in Edinburgh only for business purpose. But IANAL/IANAA.

Thanks for your reply.

What is IANAL/IANAA ?
What can be the penalty ? Any idea based on what you have seen earlier .

Can I also claim for gas, electricity, council tax, phone, broadband, daily food, substinance(£ 5 per day), etc...? If yes, is there any limit on how much I can clami for each of these type of expenses ?

Thanks.