working from home - charging company
Discussion
I have a friend's dad who owns his own company.
He is looking at buying a house in the country and working from there 3/5th's of the time. He will retain his existing house near the actual office and will be based in the office for the duration of the time, apart from extensive travelling of course.
Can he charge his company rent for the space (taking lower salary as a result)?
Can he have a pool car based at that address, therefore avoiding BIK taxation?
I could understand that if he started charging £50K for the office, the tax man might take an interest, but is there a generally accepted level where it is not frowned upon?
He is looking at buying a house in the country and working from there 3/5th's of the time. He will retain his existing house near the actual office and will be based in the office for the duration of the time, apart from extensive travelling of course.
Can he charge his company rent for the space (taking lower salary as a result)?
Can he have a pool car based at that address, therefore avoiding BIK taxation?
I could understand that if he started charging £50K for the office, the tax man might take an interest, but is there a generally accepted level where it is not frowned upon?
The tax man isn't that worried what the company pays for rent, as long as the rent is declared by the director as personal income in his Self Assessment tax return.
Obviously, rent is only subject to Income Tax and not NI so, if the rent quoted in the accounts is an attempt to "hide" genuine remuneration, then there could be problems.
If the company is goingh to base a genuine pool car at the rented premises, will "your friend's dad" be commuting to the premises on a regular basis in a non-pool car?
He cannot use the pool car for anything other than bona-fiude business trips. If he is "living" at the premises, he could be trapped there
unless he uses his "non-pool car for non-business trips.
Obviously, rent is only subject to Income Tax and not NI so, if the rent quoted in the accounts is an attempt to "hide" genuine remuneration, then there could be problems.
If the company is goingh to base a genuine pool car at the rented premises, will "your friend's dad" be commuting to the premises on a regular basis in a non-pool car?
He cannot use the pool car for anything other than bona-fiude business trips. If he is "living" at the premises, he could be trapped there
unless he uses his "non-pool car for non-business trips.Edited by Eric Mc on Tuesday 19th August 14:42
Thanks Eric.
The friends dad (no really) will apparently have another car available for use at that premises, so he would only use it for visiting suppliers, customers and the other offices, from what I gather.
I think that he will be living there, but it doesn't have to be a seperate building as such, rather a made to purpose office, suitable for whatever technology they need.
The friends dad (no really) will apparently have another car available for use at that premises, so he would only use it for visiting suppliers, customers and the other offices, from what I gather.
I think that he will be living there, but it doesn't have to be a seperate building as such, rather a made to purpose office, suitable for whatever technology they need.
CR0X said:
Can he charge his company rent for the space (taking lower salary as a result)?
As Eric says really - be careful with the reduction in salary and any rent income must go on his tax return. You also have to be careful with the amounts you claim, and they should be justifiable.For instance my amount I claim is based on my yearly bills for mortgage interest, gas, electricity, water, council tax, etc divided down by the number of rooms in total for my property and then multiplied back up by the number of rooms my company occupies (just the one in my case). Then a monthly amount is calculated by dividing by 12. My company has no other bills re energy, water, or rubbish disposal. And I'm not subject to business rates as I operate as a Consulant. My company pays it's own telecoms (dedicated business line) and it's own office insurance complete with Employers and Public Liability insurance.
Hope this helps.
Eliminator said:
And remember that the council tax (!) status of the house may change with business use
Although this is not usually an issue with those operating a business from their main residence, it could be a very major issue if another dedicated business premises is being used. Planning issues may also be a factor if someone wishes to claim that the business has its own business premises.I am slightly curious as to what else might be going on the the "friend's dad's other premises".
from what I understand:
the place in Norfolk will be the primary home for this chap. It is currently undergoing extensive re-modelling but will be a home, with office situated inside.
The main office for the company, is in Surrey, purpose-built offices etc, paying business rates etc etc.
the place in Norfolk will be the primary home for this chap. It is currently undergoing extensive re-modelling but will be a home, with office situated inside.
The main office for the company, is in Surrey, purpose-built offices etc, paying business rates etc etc.
Si in effect, he will have two residential premises - one deemed to be his main residence and the other a second (but not main) residence.
In the second residence, he will operate his business - which he seems to do already from his main home anyway.
From what I can see, he now has one business operating from two privately owned premises. On that basis, some element of the domestic costs of those premises is offsetable against the business costs.
However, if he decides to charge the business a "rent" cost for use of the second premises, he will not be able to claim the "Use of Home as Office" type costs on this second premises, but instead, claim the rental costs instead - or at least, the business proprtion of those rental costs.
Such Rental Costs, although allowable for tax relief in the company, will be subject to Income Tax on him personally. Don't forget that a company will pay tax on its profits at 22% up to profits of £300,000. An individual starts paying Income Tax at 40% on income over approxinately £40,000. Therefore, the tax payer has to work out whether claiming a cost that saves the company tax at 22% is worthwwhile if he has to pay income tax at 40% on the amount personally.
Obviously, such a scenario is only relevant if the individual is a higher rate tax payer - but it needs to be borne in mind.
In the second residence, he will operate his business - which he seems to do already from his main home anyway.
From what I can see, he now has one business operating from two privately owned premises. On that basis, some element of the domestic costs of those premises is offsetable against the business costs.
However, if he decides to charge the business a "rent" cost for use of the second premises, he will not be able to claim the "Use of Home as Office" type costs on this second premises, but instead, claim the rental costs instead - or at least, the business proprtion of those rental costs.
Such Rental Costs, although allowable for tax relief in the company, will be subject to Income Tax on him personally. Don't forget that a company will pay tax on its profits at 22% up to profits of £300,000. An individual starts paying Income Tax at 40% on income over approxinately £40,000. Therefore, the tax payer has to work out whether claiming a cost that saves the company tax at 22% is worthwwhile if he has to pay income tax at 40% on the amount personally.
Obviously, such a scenario is only relevant if the individual is a higher rate tax payer - but it needs to be borne in mind.
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