Advice about corporate rental on a flat

pleasedelete

Firstly- I do have an accountant and I will ask them but firstly trying to get a bit more information.

I am a contractor working through a limited company. 2 employees- 1 fee earning.

I have 3 main contracts and I jiggle between them on a daily and weekly basis (so may work a week for one 1 week and then not agin for 10 days but could equally invoice 2 for parts of my time on the same day)

One contract runs until 2017 with an option to extend until 2018. It is national but I mainly work within a couple of areas. If I go outside those I can charge additional expenses but the day rate remains the same.

Increasingly I am working in other parts of the country running up hotel bills of thousands a month. I get some additional expenses paid and some travel but nowhere near the cost.

I am thinking of renting a flat, initially on a 6 month let. It would be about 3 hours by train from home. It is central to the area in which I am doing a lot of work. I would still have about 25% of my work very local to my home and would travel between the 2 bases. I was going to rent it through the company. I would no longer claim additional expenses as they are for hotels only.

What is the position with this? Is it an acceptable cost for deduction pre corporation tax? What do I need to consider.

Thanks

Aquamania

pleasedelete wrote: »

Firstly- I do have an accountant and I will ask them but firstly trying to get a bit more information.

I am a contractor working through a limited company. 2 employees- 1 fee earning.

I have 3 main contracts and I jiggle between them on a daily and weekly basis (so may work a week for one 1 week and then not agin for 10 days but could equally invoice 2 for parts of my time on the same day)

One contract runs until 2017 with an option to extend until 2018. It is national but I mainly work within a couple of areas. If I go outside those I can charge additional expenses but the day rate remains the same.

Increasingly I am working in other parts of the country running up hotel bills of thousands a month. I get some additional expenses paid and some travel but nowhere near the cost.

I am thinking of renting a flat, initially on a 6 month let. It would be about 3 hours by train from home. It is central to the area in which I am doing a lot of work. I would still have about 25% of my work very local to my home and would travel between the 2 bases. I was going to rent it through the company. I would no longer claim additional expenses as they are for hotels only.

What is the position with this? Is it an acceptable cost for deduction pre corporation tax? What do I need to consider.

Thanks

Unless you know of a specific property that you can rent this way, I would say it will be difficult (unless you find a Landlord who is prepared to be less than honest)

Most BTL properties, and even more so CTL properties, will not allow letting in the way you describe.

So you either need a landlord who owns the property outright, or has a commercial mortgage on it (that will allow it to be let the way you wish to rent it).

If you do find one, then your ltd co can rent it. But what your ltd co then does with it could cause you problems. Think BiK.

pleasedelete

No. I have found a number that I can rent in this way. I can pay 6 months rent in advance if needed. I could even do a long let on a serviced apartment.

It is more the tax and benefit aspect I need advice on. I will still have my main home and this will be of no personal financial benefit for me - it will allow me to travel less and so charge more hours and so ultimately make more money but that is about it.

It is about £3k rent month-so a hefty sum.

I just am sick of 7 hour journeys home and lugging my stuff about with me.

Pennywise

As long as you NEVER use it for private purposes, i.e. you just stay there on the evenings you have to, and your spouse/family/friends never stay there, AND you've got a good business case for what you rent, i.e. a small/basic place with just one bedroom (it's just lodgings after all) in exactly the most appropriate location, then you should be fine.

The moment you "entertain" there or let family/friends stay there or if you rent somewhere too fancy for basic needs, you've blown it, and blown it 100% and won't get any tax relief, it would then be 100% taxable benefit in kind.

There was a recent court case that showed this position. It was a famous actor who rented an apartment in central london because he needed to be close to the theatre where he was performing. He would have got tax relief without argument, BUT, it turned out it was a two bedroom flat which occasionally he allowed friends to sleep over in and (I think) he also stayed in it on occasions when he wasn't actually acting that night. Despite it being agreed that most of the time it was legitimate, NONE of the costs were allowable because of the duality of purpose (all or nothing) principle.

HMRC are likely to be all over you like a rash if/when they find out the company has rented a place, so you need to ensure you're 100% compliant that it's no purpose other than somewhere to sleep (on the same grounds as a hotel room).

pleasedelete

It would be a very small 1 bed. I am looking within 0.5 miles of my main clients head office.

If it was taxed as a benefit in kind what would the tax liability be? Is the worse case that I would pay tax on the full £36,000 at my maximum tax rate. Or would i pay the full £36,000 as tax?

If someone were to stay over (no plans for that but need worse case) would I pay tax pro rata on that time? How would you split any personal benefit and any work use. I would never stay there if I wasn't working but occasionally I do end up in the same town overnight as my spouse and we do sometimes share a hotel room (probably about 5 times in last year although also often don't share as we prefer different areas to stay each near our own clients )

Aquamania

pleasedelete wrote: »

No. I have found a number that I can rent in this way. I can pay 6 months rent in advance if needed. I could even do a long let on a serviced apartment.

It is more the tax and benefit aspect I need advice on. I will still have my main home and this will be of no personal financial benefit for me - it will allow me to travel less and so charge more hours and so ultimately make more money but that is about it.

It is about £3k rent month-so a hefty sum.

I just am sick of 7 hour journeys home and lugging my stuff about with me.

Well unless it's a mansion, and I did see some lovely £multi-million mansions at about that price in leafy Surrey, 30 mins from the City by train, the other day - but they were all minimum 5 bed properties, some much larger, then perhaps that is the price you have to pay to get a pied-a-terre under the terms you wish to rent (since commercial mortgages are often so much more expensive than BTL ones)

I guess you don't need a 5 bedroom mansion to rest you head for the odd night.
So if you want to rent a property for such purposes, I would suggest you look at ones you could rent personally which should be much cheaper.

As in indication, if you were to stay at a property all working week (so 4 nights), for £3k a month you could equally have a hotel room £180 per night incl VAT
Obviously if you stay even less, then the equivilent room rate goes up more, as you only pay for the nights you actually stay.

If you get a good relationship with the hotel, they will often allow you to store your belongings at the hotel, and when I did this in the past, as the hotel in question was mainly used for business purposes (and so the weekend there was usually very quiet indeed) they even let me leave my belongings in the room over the weekend free of charge.
Obviously this was an expensive, private hotel (not a chain), which I used as the client met all expenses - if it's a pay it yourself job, I usually use a budget hotel chain for about £50 a night (no more than £100 even in the City) and put up with the packing and unpacking each week.

Aquamania

pleasedelete wrote: »

It would be a very small 1 bed....

Really? For £3k per month?
I just did a very quick search and found this 2 bed (en-suite to master) apartment in Mayfair for £750pw.
http://www.primelocation.com/to-rent/details/40121919?featured=1&utm_content=featured_listing#YZsfAsB9eHKFatkJ.97

(Although again, that is probably not available to let on the basis you are considering)

pleasedelete

It is central London- very central. I pay £240-£300 a night for a hotel at the moment. A private rental would not be cheaper. I do not want to have a lower standard of accommodation than I would have at home. £180 a night would not get a nice hotel room in central London.

I hate living in hotels. I am female and going to hotel bars and restaurants is not a great experience.

I am looking at 500 square foot - so not a bedsit but a small flat.

The 2 bed flat next door to me in Yorkshire rents at £2k a month and the 1 bed 2 doors down is £1400 so the rental doesn't seem exorbitant for central London.

£3000 is the top end- could be £2000+