Renting accommodation as a Limited Company contractor

Renting accommodation

 

Most contractors will consider renting accommodation when taking on a contract that’s some distance away from their home. Your Limited Company can always foot the bill, but how do you know if it’s classed as a benefit in kind?

 

Provided that the expense is a legitimate business cost, HMRC will not tax the value of the expense as a benefit in kind.  But if HMRC does not class the rent as a legitimate expense, it will then be seen as a benefit in kind and will therefore be taxable.

 

How is accommodation classed as a legitimate business expense?

 

The first and most important test, which should be considered everytime money is spent, is whether the “journey” is or remains a business journey. You can very easily be caught out by the 24 month rule.

 

The second test is that you have a separate property to your rented property, that acts as your main permanent residence.

 

If you travel to a client’s place of work solely for the purpose of completing the contract, then you are able to claim your rental accommodation costs as legitimate business expenses.

 

If you pay your accommodation and other associated living costs through your company, you’ll be able to reduce the amount of company tax you pay in the process.

 

Are there any risks?

The costs are allowed because they are treated as part of the normal costs of travelling, for the purposes of the contract (as travel and subsistence). Provided the journey remains a business journey then you are in the clear.

 

There are of course some pitfalls to watch out for. If you use the accommodation for personal reasons, such as providing a friend with a free bed, then this could mean a proportion of the costs are a taxable benefit. You can also be caught out if you remain in the property at weekends on a regular basis rather than returning home, although occasional stays would be ok.

 

If you don’t have a permanent residence and move from one temporary residence to another, you will be taxed on the costs met by the company. This is because the property serves two purposes, your main home and to allow you to work in the location. In this case the full cost would be taxable.

 

Finally it’s not just the rent cost that can be claimed, but the rules can be very tight and you should check before spending company money on the multi media equipment and expensive furniture.

 

It’s better to be safe than sorry!

Before agreeing to a lease on a temporary accommodation, it’s always best to run it past your trusted contractor accountant to ensure you won’t be left out of pocket. Working out which expenses are allowable can sometimes be tricky, but it’s worth understanding their value for tax purposes.

 

Your contractor accountant will be able to provide you with expert, tailored advice when it comes to your tax and business spending, ensuring you get the best and most from your business and personal income with expenses.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Training costs

Training costs

The majority of contractors will invest in training at some point in order to keep their skills up to date and attractive to potential clients. For some this will also be a requirement of a professional membership, as part of their continued professional development (CPD). As courses can be expensive it’s preferable to pay for these through your company rather than from your personal income. HMRC recognises that training can be necessary within a business, so these costs can be claimed as tax deductable business expenses through your Limited Company.

However, it’s important to be clear on what type of training is being taken and for what purpose as not all training costs qualify as a legitimate business expense under HMRC rules.

 

What types of training qualify?

HMRC specifies that to qualify as a legitimate business expense the training must be ‘wholly necessarily and exclusively’ for the purposes of existing trade. This means that the training taken must be in a skill or subject which directly applies to work currently generating income for the contractor. If the training taken clearly complies with this definition then no significant benefit in kind will be assumed.

 

What if I’m training to enhance my skills?

A key point is that training taken to gain new skills for the future, but not directly relating to current fee earning work, is not allowable and will have to be paid for at the contractor’s own personal expense.

Training which falls into this category will be deemed either as a benefit in kind for the contractor personally or capital expenditure for the future benefit of the business.

For Limited Companies, HMRC will not allow the cost of gaining new or un-related skills as a legitimate business expense. However, once you have taken the training and start earning income using those new skills further training in these new areas will be allowable.

 

Should I let a client pay for my training?

There are several reasons why this would not be advisable, the main one being that employers usually pay for training for their employees, so you could potentially run into issues with HMRC under IR35. If the client really wants you to do the training the best option would be to pay for it yourself.

If you are un-clear whether any training you have taken or are planning to take would be allowable, contact your contractor accountant for guidance.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Renting accommodation as a contractor

Renting accommodation as a contractor

When is it a benefit in kind? Can the company pay my rent? What if it’s a second place I’m renting?

It’s quite common for Limited Company contractors to work at a client location which is a long way from home. Many decide it would make sense and be easier all round to rent a property closer to their temporary place of work. Most will put the costs of this through their companies. It’s possible for accommodation expenses to be tax deductable as legitimate businesses expenses, as long as the arrangement complies with HMRC rules. Otherwise, the rental will be seen as a benefit in kind and will not be allowable.

 

What is allowable rented accommodation?

The general rule is that you can only claim for expenses relating to a rented property if you have another property which is your principal residence. Your principal residence must be recognisably ‘home’ in that it must be the place that you ordinarily spend the majority of your time and where, usually, most of your possessions are housed.

If you must travel from home to the client’s site wholly and necessarily in order to carry out your work then it’s perfectly legitimate to claim your rental accommodation expenses through your company as allowable business expenses. If you choose to you can decide to pay your rent and all related expenses directly through your company and reduce your tax in the process.

The key point works in exactly the same way as it would with an employee of an organisation. If the employer needs the employee to work for a short time in an entirely different location the employer would pay all travel, accommodation and some food related costs for this and claim tax deductions for these within their own business expenses.

Providing that you are commuting back to your main residence when you are not working on your client’s site, you can claim the full cost of the rent.  However if you are staying in the rental accommodation all week, you will only be able to claim a proportion of the rent based on the days you have worked at your clients site.  For example, if you stay at the weekend, you will only be able to claim 5/7ths of the weekly rental amount.

Working out allowable business expenses can sometimes be a bit complicated but it’s always recommended that your business expenses are in good order for tax purposes. Contact your contractor accountant if you are in doubt about the correct tax treatment for any area of your business spending. They will be able to advise you on the most suitable options for your tax status ensuring you get the most from both your business and personal income.ion expenses

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.