Best way for business to pay for property
Options
Comments
-
Thanks for your comments and time.
I can see the logic to selling current home (and it's exactly what I'd suggest to someone else), but I'm finding it really hard to get my head round leaving our lives elsewhere (where we've spent nearly 50 years each and have a lovely house) and moving to somewhere we don't know but is much more expensive ONLY for the (so far) benefit of 12 months work (6 months done, 6 months to go) but also admittedly better long term work/career prospects.
Currently we'd rather get an appartment, just looking at the best way to do it legally and above board.
BTW - The loss of the tax benefit is not the end of the world. It's only the difference between paying for the accomodation before tax rather than after tax, so we're only losing a % of the cost. Obviously we'd rather have the benefit if we could but it's not 100% loss.
Just as an aside - as it happens short term accomodation is about the same price as 1st class (seated and acceptable) season ticket (about £20K). So one way to look at it - is that this is the price of working in London and not moving there.0 -
BTW - as far as IR35 is concerned we are told by the professional that it depends how the contract is written. The minutae of the contract has been checked and declared suitable for avoiding IR35.0
-
BTW - as far as IR35 is concerned we are told by the professional that it depends how the contract is written. The minutae of the contract has been checked and declared suitable for avoiding IR35.
The wording of the contract isn't particularly relevant. It the actual working practices that are the deal-breakers for IR35. If the contract wording mirrors the real working practices, then you're fine, but if, say, the contract allows for substitution but in reality the end client wants your OH and no-one else, then you've got major IR35 problems! The IR35 specialist contract reviewers don't just want to see the contract, they ask for a completed working practice questionnaire. Maybe time for your OH to reconsider who reviewed his contract?0 -
Re buying a property, if you buy it, rent it to the company, and both live in it, there are some pitfalls.
Firstly, the rental income is taxed on you both personally, to negate the tax relief gained by the company on it's payment.
You won't get private residence relief nor lettings relief for capital gains tax relief when you come to sell it as it's never been "your home" - it's been rented out to your company, so it's not different to having been rented out to a third party.
You and your OH may end up being billed by HMRC for the benefit in kind of living accommodation provided by his company. This is more likely in your case because you'd be living in it (not just your OH) so duality of purpose kicks in.
Don't forget to factor in the legal etc costs of buying and selling it - if you only keep it for a short period, the "gains" of cheaper accommodation and any value increase could well be obliterated by the costs of buying and selling it.
Of course, if you end up keeping it after he stops working from it, and you rent it out to other people, it gives HMRC even more reason to enquire into you and challenge your claim that it was only purchased to save money whilst he was contracting in London.
At the end of the day, what "benefit" does the company get from you buying and renting it a property, compared with the company renting a property from someone else. There is likely to be none, so ultimately, your plan is personal benefit for you, not the company! I foresee HMRC being all over this like a rash if you go ahead, so be prepared for some battles with them along the way.0 -
At the end of the day, what "benefit" does the company get from you buying and renting it a property, compared with the company renting a property from someone else. There is likely to be none, so ultimately, your plan is personal benefit for you, not the company! I foresee HMRC being all over this like a rash if you go ahead, so be prepared for some battles with them along the way.
And of course, if they decide to look into the property issue they may well decide to investigate your husband's IR35 status, and while you can hope that they'll either find his contract is outside it (although I have my doubts) or that the insurance does what it says it will, it's going to be a lot of hassle for probably quite a long time.0 -
Thanks for the advice about the pitfalls.I foresee HMRC being all over this like a rash if you go ahead, so be prepared for some battles with them along the way.
If it's not something we can do legally and above board then we won't do it.
Looks like the conclusion is that after 24 months our options are:
. move permanently to London (there are likely to be better career options)
. buy a second home personally/residentially
. get an appartment or long term rent (but out of personal income not business)
. get a job closer to home (didn't happen for the whole of 2013 but that was before the ecomony picked up)
We may feel differently once mother/MIL is in a home. On Sunday she had her blouse on inside-out which is another sign of mental decline.
This is an interesting one.The fact that you think he'll be there long enough to warrant buying a place to me says that you expect him to be working there for more than 24 months which as somebody has already pointed out, strictly means that you are no longer able to claim travel or accommodation expenses
It is unknowable and very difficult to assess quantitively. The factors affecting it are mainly availability of work which is unknowable and qualitative factors (such as the esteem in which the individual is held)
If I understand "expectation" correctly i.e. being an assesement within an individuals mind, then it appear to me that optimists are penalised by HMRC whereas pessimists get benefits in this case :-(
I am genuinely feeling more pessimistic about the whole situation, but thank you very much for the advice which is much appreciated.
We may be able to consider our choices more objectively right now but after a year of unemployment DH was understandably very relieved after suffering some loss of self-esteem.0 -
If I understand "expectation" correctly i.e. being an assesement within an individuals mind, then it appear to me that optimists are penalised by HMRC whereas pessimists get benefits in this case :-(
Indeed, I'd be interested to know whether HMRC have ever challenged payment of expenses before the two years are up based solely on an expectation that the contract will continue for longer (i.e. no signed contract for a longer period). I suspect it's unlikely to happen and that it's stated in the hope that some people will worry about it enough not to claim. It would actually be better to have a strict 2 year cut off point regardless of contract length or expectations.0 -
Indeed, I'd be interested to know whether HMRC have ever challenged payment of expenses before the two years are up based solely on an expectation that the contract will continue for longer (i.e. no signed contract for a longer period). I suspect it's unlikely to happen and that it's stated in the hope that some people will worry about it enough not to claim. It would actually be better to have a strict 2 year cut off point regardless of contract length or expectations.
I agree with this and I believe the OTS have recommended improving or simplifying rules around temporary workplace expenses.
As I said before, whilst in theory you should stop claiming when you know its going to be more than 24 months, in practice it would be hard for HMRC to show that you expect a contract to go beyond 24 months without evidence so if your contract has an end date that doesn't take you over I wouldn't worry about it.
The problem with the 24 month rule is that it isn't really designed for the modern contractor/freelancer who may well work for one client more than 2 years but still work for multiple clients in different locations.
As far as HMRC are concerned, they give you 24 months allowance and once you reach that point you are expected to move closer to your place of work or stop claiming. That doesn't really work very well for many contractors.0 -
As I said before, whilst in theory you should stop claiming when you know its going to be more than 24 months
Sorry to be picky but what you said before was "expect" not "know" and that was a pivotal word and I took you literally.
I guess what this would come down to is what any reasonable person might think.
So for example if someone was on a 5 year project and had key qualifications/skills then it might be reasonable to have an expectation.
I'm not worried about the 24 month thing as there are few grounds in this case for expectation - it's more confidence.
Now you could argue that it's crazy in that case to be looking at buying and that's a valid viewpoint that I welcome, however we are at least considering longer term career prospects and are not averse to being landlords either so it potentially goes beyond this contract.
I fully accept that there is no entitlement to a tax benefit on buying vs renting - just looking to make the best of the situation legally and fairly.
If it's not a runner then I accept that.0 -
Sorry to be picky but what you said before was "expect" not "know" and that was a pivotal word and I took you literally.
What HMRC actually say is (emphasis mine):But there is a further rule that prevents a workplace from being a temporary workplace where an employee attends it in the course of a period of continuous work that lasts, or is likely to last, more than 24 months. Where this further rule applies the workplace will be a permanent workplace.
Furthermore, the 24 month rule only applies if you spend more than 40% of your time in that location - below that you can claim expenses for as long as you like as HMRC will always consider it temporary in most cases - but it sounds like your husband spends more than that on-site.
Again, emphasis mine:The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months.
But in short, if the extended contract still ends within 24 months then it would be hard for HMRC to show that it was likely for somebody was spend more than 24 months in one location, short of actually interviewing the client.
Source:
http://www.hmrc.gov.uk/manuals/eimanual/eim32080.htm0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608.1K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards