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Charging Your Limited Company Rent for Use of Home

Friday May 2014

HM Revenue & Customs have recently issued revised rates for use of home payments but as
you may expect, they are not generous at all.

However, there is an alternative that we have been looking more closely into.

If your company is based from your home and you wish to claim an expense for this you should formalise the arrangement with a rental licence agreement.
You should also ensure that you have a Board Minute recording the agreement.

Providing the rental agreement clearly sets out that the company will not have exclusive use of that part of the home then this arrangement should not create capital gains tax implications if you sell the property in the future.

The rent that is charged to the company should be reasonable and justifiable and not in excess of commercial market rental values of serviced office space – research these locally. Also, bear in mind that if the amount of rent charged to the company, which then is subsequently paid to you, exceeds the household costs that you have personally incurred for that area of space, you will be taxed on the difference which is regarded as rental profit.

Alternatively, if you just have reimbursement of household expenses credited through your directors loan account you should have an agreement in place via advance notification with HMRC. Otherwise, it is strictly a PAYE situation where PAYE/NIC would be due on any unagreed ‘profit’ element.

You should show the rent and expenses in your personal Self Assessment Tax Return and note in the white space that it relates to the company renting space from the director.

Note that the rent‐a‐room scheme can’t be used in respect of the provision of office space – this only applies to accommodation used as living space.
You will need to set this up properly so please contact us beforehand.

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