AR Tax Accountants

Are you entitled to rent payments from your business?

Are you entitled to rent payments from your business?

Company directors using their personal home for business purposes are entitled to charge their company rent in the same way that a home owner of a property on Airbnb charges rent to its tenants.

It is important to note you as a private homeowner and your limited company are completely separate legal entities and both entities (you as an individual and your limited company) are capable of entering into contracts in your own right.

In the event of a tax enquiry HMRC would want to determine whether your home was genuinely being used for business purposes, how the rental charge was calculated and if it was reasonable, and whether or not the rent that you were receiving personally from your limited company was being declared on your personal self-assessment tax return.

It should be relatively straightforward to demonstrate to HMRC that your personal home is being used for business if it is your registered office, if you receive business mail at your home address, you are not claiming to run your business from another premises, have a rental agreement in place, and you store your company’s paperwork at your address.

Like any property business, the rental charges would be calculated based on your home’s running costs that reasonably relate to your company’s business operations, e.g. a proportion of your mortgage interest, council tax, broadband, home insurance, gas, electric, water, repairs, etc. Furthermore, calculating your rental charge based on a proportion of your home expenses and declaring these expenses on your personal tax return together with the rent received will generally result in a minimal (or potentially no) personal tax bill.

This exercise will generally save you corporation tax as the rent paid by your company would be a business expense and save you salary/dividend taxes as company money is being taken out from your company in the form of rent rather than salary/dividends. For further reading please visit here and/or here.

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AR Tax Accountants

£59/month accountants for contractors, freelancers, consultants, interims and locums

The above information is just for guidance purposes only and is not a substitute for professional advice and consulting the legislation.

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