Reply to: How to fix duality of purpose problem on leased flat

[jamesbrown]

Yep.

In some cases it won't cause any additional costs but in other cases i.e. you are the only one in during the day so the £4 a week won't cover it.

Maybe. There's a fair amount of conflicting advice though, and given the relatively small amounts involved, it seems questionable. Also, what is the basis for being certain about business rates? Take this for example:

Working from home - Council Tax - VOA

There may be case law where a council has tried it on and failed (?) but it seems that business rates could be levied for a dedicated office in the home

[SueEllen]

Yes, as I said, it's a moot point for the OP. Frankly, I don't think you can exceed the standard allowance by a "worthwhile" amount in the vast majority of cases, but I don't want to argue that point, as it partly depends on your interpretation of worthwhile. However, I am interested to know what you're referring to w/r to the "dedicated office." Are you talking about working primarily/exclusively from home under the second of these scenarios linked below?

Contractors

Yep.

In some cases it won't cause any additional costs but in other cases i.e. you are the only one in during the day so the £4 a week won't cover it.

[jamesbrown]

You could claim rent if you got a property specifically large enough to have a dedicated room to be your office - and no you wouldn't have to pay business rates on it. You can also exceed the allowances if you spent the majority of time working from it. In all cases you would need proof of why you have done this.

However the OP cases falls outside all this as it's the property his family live in as their primary and only residence.

Yes, as I said, it's a moot point for the OP. Frankly, I don't think you can exceed the standard allowance by a "worthwhile" amount in the vast majority of cases, but I don't want to argue that point, as it partly depends on your interpretation of worthwhile. However, I am interested to know what you're referring to w/r to the "dedicated office." Are you talking about working primarily/exclusively from home under the second of these scenarios linked below?

Contractors

[SueEllen]

Assuming that this is not a dedicated office space (with all the implications that has), my understanding is that you can't even claim a portion of rent or mortgage because that is something that would've been paid regardless. I think the claim must relate to additional expenses incurred, such as electricity etc., which is the basis for the time/area calculation and why the itemized expenses almost never exceed the standard allowance.

You could claim rent if you got a property specifically large enough to have a dedicated room to be your office - and no you wouldn't have to pay business rates on it. You can also exceed the allowances if you spent the majority of time working from it. In all cases you would need proof of why you have done this.

However the OP cases falls outside all this as it's the property his family live in as their primary and only residence.

[SueEllen]

Yep - I agree - but to be sure about the intention we'd need further examples that didn't involve changing country (is that the key?) and/or giving up renting rather than selling. I suppose for the 1 man contractor, you'd have to have a business address in the 'permanent' place, but that could be accountant's office? As with much of HMRC guidance, there's room to interpret it any way you see fit...

Your can interpret anyway you see fit but a bit of common sense is needed.

A tax inspector wouldn't believe an entire family would move every time one of the adults acquires a new role.

[mudskipper]

Question is.. Is this a realistic situation? You can break any rule if you try to put unrealistic situations in. How many people really sell their flat to move for a gig? I think also the key here would be moving to a different country within Europe as well. Maybe this might change when Scotland devolves but I think would be pushing it at the moment.

Yep - I agree - but to be sure about the intention we'd need further examples that didn't involve changing country (is that the key?) and/or giving up renting rather than selling. I suppose for the 1 man contractor, you'd have to have a business address in the 'permanent' place, but that could be accountant's office? As with much of HMRC guidance, there's room to interpret it any way you see fit...

[northernladuk]

Actually, is this as black and white as we all assume?



So, if I live in Edinburgh rather than Germany, and sell my flat and move to London for the duration of my contract with the intention to move back to Edinburgh at the end, is this allowable?

Question is.. Is this a realistic situation? You can break any rule if you try to put unrealistic situations in. How many people really sell their flat to move for a gig? I think also the key here would be moving to a different country within Europe as well. Maybe this might change when Scotland devolves but I think would be pushing it at the moment.

[mudskipper]

Actually, is this as black and white as we all assume?

This can be contrasted with the example below of an employee on secondment who has not retained accommodation for the duration of the secondment. Such employees are not itinerant and the expense of accommodation at the temporary workplace is attributable to the business travel.

Example 2
An employee of a German company is seconded to a temporary workplace in the UK for 15 months. He sells his flat in Germany and rents a flat in the UK. When he returns to Germany he will need to find himself a new place to live.

The rent of the UK flat is attributable to the business travel and a deduction can be given for the cost, see EIM31815.

So, if I live in Edinburgh rather than Germany, and sell my flat and move to London for the duration of my contract with the intention to move back to Edinburgh at the end, is this allowable?

[mudskipper]

Some links:

Specific deductions: use of home: specific expenses

Some costs relate to the whole house and have to be paid even if there is no business use. These include costs such as, Council Tax, mortgage interest, insurance, water rates, general repairs and rent.

If part of the home is set aside solely for business use for a specific period then a part of these costs is allowable.

The below link is probably where your accountant is coming from -but the issue here is that you cannot claim it is accommodation provided by yourCo for a temporary workplace if you and your family are living there, and you have no other home. Where is your permanent workplace if the flat is provided for a temporary secondment?

Travel expenses: general: scale of expenditure: accommodation

An employer may provide an employee on secondment at a temporary workplace with furnished living accommodation or with a cash allowance out of which the employee can obtain living accommodation.

THis one sums sounds like your situation:

http://www.hmrc.gov.uk/manuals/eimanual/eim31817.htm

An employee performs the duties of her employment at a series of temporary workplaces. She has no permanent home. She stays in guest houses and hotels near wherever she happens to be working. This is the only accommodation available to her.

She has to live somewhere and the costs of accommodation are attributable to her general need for shelter, rather than her attendance at a particular workplace. Her travel is between her temporary accommodation and her temporary workplace. The cost of accommodation is not attributable to the cost of that travel. She is not entitled to a deduction for the cost of this accommodation.

[mudskipper]

Hopefully one of the accountants will be along to give proper advice, but it seem to me:

You've taken out the lease in your Ltd company name

so simply calling it a 'director's loan' isn't going to work (might be OK for the deposit, council tax etc.)

I think you're going to need to pay it out the Ltd Co, but declare it as a 'Benefit in Kind' on your PD11 - i.e. you will be taxed as if you'd paid it out your own income.

[LisaContractorUmbrella]

So I called my accountant, and he confirmed his belief that all is fine since the rent contract is on my Ltd and not on me. He suggested me that there was never a problem with this and that it is fine. Does it matter if the contract is on my Ltd?
I don't think he does have too much experience with IT contractors though, maybe in some other context it is fine, I don't know, or he just has very bad information.

Oh dear. Please find a new accountant.

The property you are talking about is your only residence, it is where you and your family live. From what you have said it sounds as though you occasionally use the spare room to do some paperwork - this is not the same as leasing a commercial property which is used solely for the operation of your business. At the very best you could claim £4 per week for working from home.

[jamesbrown]

"accountant"

Edited to say: There are even accountancy forums your "accountant" can check this information on so there is no excuse for his ignorance. You cannot claim the rent of the entire flat as a business expense if your family live in it full time.

Assuming that this is not a dedicated office space (with all the implications that has), my understanding is that you can't even claim a portion of rent or mortgage because that is something that would've been paid regardless. I think the claim must relate to additional expenses incurred, such as electricity etc., which is the basis for the time/area calculation and why the itemized expenses almost never exceed the standard allowance.

[SueEllen]

I strongly suggest you use the resources on this board to find a new accountant asap.

Even if it costs you money to get away from this "accountant" it will save you trouble and stress in a few years time.

And I know people who have been given very bad advice by their ex-accountants

Edited to say: There are even accountancy forums your "accountant" can check this information on so there is no excuse for his ignorance. You cannot claim the rent of the entire flat as a business expense if your family live in it full time.

[naos]

So I called my accountant, and he confirmed his belief that all is fine since the rent contract is on my Ltd and not on me. He suggested me that there was never a problem with this and that it is fine. Does it matter if the contract is on my Ltd?
I don't think he does have too much experience with IT contractors though, maybe in some other context it is fine, I don't know, or he just has very bad information.

[Wanderer]

Is there a way to rollback all it somehow ? Can I just not claim these amounts as company expenses and leave the fact that they were made from company money ? Or should I somehow put the money back and repay from my personal money ?

I agree that you can't claim for the flat if it's your only residence.

It's a simple enough one to fix though so don't panic. Tell your accountant that you are not going to claim for the cost after all and ask them to allocate the amount you took to the director's loan account and this can be balanced up the next time you pay out a dividend.

If you do nothing, then you would have to account for it as a benefit in kind and pay the tax on the BIK.