Self Emplyoyed v Ltd Company

zygurat789

There is a thread on accounting web that touched on this subject

http://www.accountingweb.co.uk/anyanswers/question/use-home-ltd-company

And the VOA

http://www.2010.voa.gov.uk/rli/static/HelpPages/English/help/help019-about_working_from_home_and_business_rates.html;jsessionid=48655d2ead601c1533059508d6dd50d465020c12f066e173345f04e62c565950.e38SbhqNch4Pe34Tbxr0

if it helps

Savvy_Sue

chrismac1 wrote: »

On the subject of the last post, name ONE case where there was EITHER a successful CGT charge or a charge to business rates.

chrismac1 wrote: »

So that was ZERO cases you have named then.

I cannot remember the exact details, but at work we were running a residential home with staff sleeping in. The plan was for staff to be sleeping in the office on a bed-settee.

The Valuation Officer came to inspect the premises - I cannot remember why because the property had been subject to CT before we took it over. He did not enter the property but inspected from outside, and because he could not see a bed in the office we were liable to pay business rates on that room.

Dr_Teeth

chrismac1 wrote: »

On the subject of the last post, name ONE case where there was EITHER a successful CGT charge or a charge to business rates.

There will have been many, but they would only become known to those of us outside HMRC if they went to tribunal. So it's quite feasible that CGT charges have been raised by the inspector and the individual has accepted it and paid.

Any competent accountant should know this.

chrismac1

So that is still NONE then. This is an issue I ask other accountants about regularly, I have yet to meet even ONE who has had a client face a CGT bill on selling their main residence due to reasonable business use of one room. Personally I think it is just HMRC scare tactics, that is why I say once again - quote me ONE case.

Bear in mind that any CGT bill would be hefty, I would be filing Tribunal papers at 100 miles per hour and the same in my view is true of all competent accountants. So it ought to be easy peasy to find a case.

purdyoaten

I have a case which has been passed to me (whoops! nearly a month ago) where a sole trader operated the administration side of his roofing business from his main residence. HMRC has quoted 'Batey v Wakefield' to the guy's accountant.

I agree with chrismac1 that there is no case law on this and that the inspector has simply quoted 'case law' in the hope that the accountant will fold - in my eyes the case has no relevance whatsoever as it deals with 'other buildings which could form part of the main residence' - the roofer has a house and garage and operates from a ground floor room. I am looking forward to our meeting next month.

Nevertheless, I hope that the point that I made regarding the declaration of the rental income has not been lost.

TheCyclingProgrammer

Skinnylatte wrote: »

My company is a limited company and I can therefore charge it rent for the use of my own home, he said £25 a week was a reasonable amount.

Yes, you can do this. But the rent you charge YourCo, as well as being reasonable and not excessive, shpuld ideally be no more than the actual costs you can deduct from your rental income. Any profit you make on your rental income will be taxed on you personally.

If you can justify allowable rental costs of £25/week to offset against your rental income on your tax return then fair enough.

Skinnylatte

Thank you all. I feel my accountant may actually be wrong after reading all this, no I was not aware it was classed as taxable income, and as my accountant also does my personal tax return he really should have told me this.
I will be off to get a second opinion, thank you all, that's why I love these forums

gasontour2004

I would expect that the accountant has suggested a non exclusive rental arrangement. Therefore the room(s) are not being used 'Wholly and Exclusively' for business and cannot therefore be Capital Gains taxable as it is not a business asset.

Most accountants would get their clients to complete a spreadsheet looking at the costs incurred and the create a formal agreement for a portion of these costs. When the individual income tax is completed, these amounts should be included in the income from land and buildings with the income and the expenses being equal netting any profit off to Zero.

TheCyclingProgrammer

The above is exactly what should have happened but it sounds like it didn't in this case.

You're also right about losing avoiding CGT PRR on the room by having a non exclusive arrangement and ensuring the room is not exclusively for business purposes - something else any good accountant should have at least explained beforehand.