Ilyas Patel Accountants in Preston
The modern business landscape often blurs the lines between personal and professional spaces.
For directors who find themselves in a position where their home doubles as their workspace, the question arises: Can you charge your company rent for this dual use?
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Directors may need to perform a significant portion of their duties from home or even base their company there. In such scenarios, there are three avenues to consider:
It’s crucial to remember that not all home-based costs are reclaimable.
Mortgage interest or rent, water rates, and unreceipted expenses such as cash payments to a cleaner fall outside the scope of reclaimable costs.
Now, let’s look at what is covered.
If you’re investing in business equipment, capital allowances on these costs can be claimed.
Your company can furnish you with the necessary tools for your job, with certain items like mobile phones and computer equipment available tax-free.
However, a ‘use of asset’ tax benefit charge can be levied if an employer-provided asset is used privately.
To avoid this, employers should establish explicit usage restrictions in writing.
For items like furniture that could be used privately, ensuring that the home office remains distinctly separate from the living space is advisable.
Your company may be eligible to reclaim VAT on certain building works done to your property.
Yet, tread carefully, as any personal benefit can obstruct this claim.
It’s a delicate balance between company ownership and personal use, and the tax implications thereof.
Examples of where this VAT reclamation would apply is a loft conversion, to a home office for a sole trader to work from home.
If HMRC is informed well in advance, and it’s clear this office is going to be only for working use, it may be claimable.
Opting to charge rent puts you into the role of a landlord, operating a commercial property venture.
This transition brings about certain responsibilities:
Directors utilising a portion of their home as an office can navigate the tax landscape with precision by understanding what is and isn’t permissible to claim.
The aim is to strike a balance between legitimate business expenses and personal use, ensuring tax compliance while maximising the benefits of a home office setup.
At Tax Expert, we’re dedicated to guiding you through the details of tax-efficient home office management.
Reach out for bespoke advice tailored to your unique situation and let us help you harmonise your workspace with your tax obligations seamlessly.
Contact us today at 01772 788200 to find out more about how we can help, or WhatsApp us out-of-hours at 07787 010190.
Kind regards,
Ilyas Patel