Rent a room scheme for your company office

[aceparts_com]

I've heard that the government allows one to 'rent a room' for a tax free amount of not more than £4000 pa or something. Is this also applicable to your office. I.e. I rent a room out to my company for use as an office and pocket the rent?

Failing that, can someone remind me what you're allowed to claim against office expenses if you worked from home (as a ltd co or otherwise) as i'm trying to weigh up a few ideas!

[Eric Mc]

No - the Rent a Room scheme is specifically not available to businesses. If you decide to "Rent" a room in your house to a business "owned" by you, you would have to declare the income receivable from the business in your Self Assessment tax return as personal rental income. Rather pointless really as the company might get the deduction of the rental cost as a charge in its Profit and Loss account and therefore reduce its Corporation Tax bill, but you would end up paying additional Income Tax on the rental income - probably at a higher rate of tax too compared to the rate of tax paid by the company.
The idea behind "Rent a Room" was to relieve the pressure many domestic mortgage payers were under in the early 1990s due to negative equity.. So far, no Chancellor has been "brave" enough to abolish it.

When running a ltd co. from home, it is possible to put through a "charge" for "Use of Home as Office". It is normally based on the following costs added together and then divided by the number of habitable rooms (excluding bathrooms and hallways)in the house:

Gas
Electricity
Water Charges
Council Tax
Contents Insurance.


>> Edited by Eric Mc on Monday 6th February 20:29

[aceparts_com]

You're always such a wealth of information. Here's an idea for you Eric, create an online tax advisory service - you'd make a fortune

[Eric Mc]

I'm too busy running a more "conventional" form of practise.

[chrisgr31]

If you rented a room to a company you would almost certainly be creating a liability for Non_Domestic Rates as well, which would be a nasty surprise!

[Eric Mc]

This issue always seems to crop up when discussing the use of the home partly for business purposes. By and large, unless you have to make substantial alterations to the house to accomodate the business or if the use of your house for business purposes causes the whole nature of activity around your house to substantially change, this is very rarely a problem.

The same goes for Capital Gains Tax.

Putting through a proper "Rental" charge in the accounts might be a slightly more risky strategy than a "Use of Home as Office" charge, but, as I said earlier, the main problem would be the personal Income Tax implications of having to show Rental Income on your personal Self Assessment tax return.