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.