Renting a room in my own house for business

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bamboozle

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Hi,
New user, i am in the process of setting up a company, initially as a sole trader and hopefully in time as a ltd company.
i own a house with my brother and was wonder if anyone can advise if i could rent the spare room in our house (as an office) then use this rent as a company expense? (as in pay my brother rent of the room)
i'm hoping to be able to allocate a proportion of gas, phone, internet bills towards company but would be interested in allocating the rent of the room.
any suggestions?
 
Re: Rentin a room in my own house for business

Yes, you can, however then your brother (assuming he is the one receiving the rent) will have to declare this as income and may be liable for tax on it. The "rent-a-room" scheme only applies to residential accommodation, not to a business within a property.

If this is not correct, then please let me know as I could to exactly the same. The €7650 rent a room scheme would be a nice little scheme if it could be applied to a home business.
 
Re: Rentin a room in my own house for business

Lobby said:
The €7650 rent a room scheme would be a nice little scheme if it could be applied to a home business.
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I would be surprised if this was actually the case.

Note that using/renting your home (in part or full) for business use (especially where the business writes off some of the cost as deductible expenese) will most likely have tax (e.g. SD, CGT and/or rental income tax) implications. In addition there may be other implications (e.g. privately managed estates may have rules about this, planning permission may be required, insurance and/or mortgage implications etc.).

If I was you I would get independent, professional advice on this proposal.
 
Re: Rentin a room in my own house for business

Extract from Revenue website : -
Where a room (or rooms) in a person’s sole or main residence is (are) let as residential accommodation, gross annual rental income of up to €7,620 is exempt from tax. Relief in respect of mortgage interest relief is not affected. The relevant Capital Gains Tax/Stamp Duty provisions are also not affected. For more information see Leaflet IT 70.
This clearly precludes getting the relief from a business tenant. It would mean your brother would be liable to tax/prsi at his marginal rate on the net rent, and, as Clubman said, there may be other issues on SD/CGT etc. so professional advice definitely warranted.
 
As far as I know where the business use is only as a "home office" then there is no effect on Stamp duty, CGT etc. Your insurance company may require you to list any high value items you have though and certainly tell them that there is a "home office" but theres usually no change in the premium - ours wasn't affected.

However, if the usage involves the public visiting your premises (e.g. a doctors surgery) then this would have implications for the items listed above, particularly insurance.
 
Lobby said:
As far as I know where the business use is only as a "home office" then there is no effect on Stamp duty, CGT etc.
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Yes - but renting out to a third party for use as an office is surely a different ballgame?
 
You may leave yourself open to rates being charged. Generally, I wouldn't charge rent but claim a reasonable proportion of house expenses. You'll get a deduction for corporation tax worth 12.5% for rent but you and your brother will be liable at 20 or 41% and you open up cgt possibiblities.
 
The rent a room scheme is def out as per posts above, in addition you should take care as if you rent your PPR and your brothers PPR when it comes to sell it, then a proportion of your gain will be liable to CGT. as the proportion of your home used as an office and rented will not form part of your PPR. It could affect your stamp duty exemption too if you availed of it.
 
I am currently using a room in my house as a office and using an umbrella company. I have een told to charge my mortgage as an office rent/expense at a proportional rate i.e. 3 bed house and using one as an office means 1/3 of the mortgage can be deducted as an expense. Same then goes for the bills.
I have been assured this is correct by my accountant and another IT contractor.
Now I am about to set-up a limited company and think the same is right?

o.p.
From what you are saying I think you could right off 1/6 of the total mortgage and 1/3 of fuel costs,plus phone, broadband etc...
 
Did your accountant explain all of the tax implications of this move - e.g. CGT and possibly SD implications? Not sure if owner occupier mortgage interest relief might also be affected.
 
ClubMan said:
Did your accountant explain all of the tax implications of this move - e.g. CGT and possibly SD implications? Not sure if owner occupier mortgage interest relief might also be affected.
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He says it is fine one of the recruitment websites says the same as does another accountant. I am acting in good faith. Simply I bought this house with an additional room for an office so it makes sense a portion of the mortgage is an expense. THe other tax issues shouldn't a be a concern. I pay the accountant to know these things so Isn't he liable not me?
 
FillSpectre said:
Are you an accountant?
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No - but I know that this is the case. Ignorance (no matter if it was in good faith) of the law is not an excuse that Revenue will accept.
It is and not just from this guy as I stated. I am not sure what makes you an expert care to enlighten me?
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Sorry - it's also from some website or other so it must be true. My bad.
 
ClubMan said:
No - but I know that this is the case. Ignorance (no matter if it was in good faith) of the law is not an excuse that Revenue will accept.
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Actually you are wrong when it comes to penalties from my experience. Maybe you have been fined by the revenue but I haven't.
ClubMan said:
Sorry - it's also from some website or other so it must be true. My bad.
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Your bad is the fact you are so sure you are right over more than one proffesional accountant.

I personally doubt you know more than them and have yet to give any reason how you do know more.

No need to reply

OP
The link above states how it can be done maybe you might want to ring the revenue to clarify to put your own mind at risk as you will get certain people tell you different regardless of whether they know or not.
 
Hook Head Software are a recruitment agency, not an accountancy or tax firm. As such they should never be relied upon as a definitive source for accountancy or tax advice as they would not be legally liable to anyone for the consequences for bad advice on topics outside their core expertise.



Hook Head is an IT Jobs site specifically designed for IT Professionals looking for work in Ireland. Hook Head's approach is holistic in nature in that we believe in order to attract top quality IT Job Candidates we need to offer something of value in return to those candidates, and to get the best quality IT Jobs Listings we need to have a highly-skilled captive audience. Our goal is to satisfy both of these desires by means of our IT Community.
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Btw, I could not find any indication either on google or on their site that Mark Burke is a "professional accountant". Can you enlighten us?
 
ubiquitous said:
Btw, I could not find any indication either on google or on their site that Mark Burke is a "professional accountant". Can you enlighten us?
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Good for you as I have stated more than one accountant I have spoke to has said it is ok. I also suggest clarifying with the revenue.

The link was just to show somebody else saying it.

Recruitment agencies deal all the time with contractors in IT services and know the benifits. The fact they aren't accountants would not mean much to me but OP check with the revenue if you are worried.
 
This thread had me intrigued for some reason so I just rang my brother about it (he's an accountant). He said that the charges and proportions FillSpectre mentions seem very reasonable and it is something many accountants encourage because it allows the claiming of expenses that would not otherwise be deductable. However, this needs to be balanced by the CGT implications. If you are claiming that x% of your abode (even if only for a certain duration) is a business then it follows that this proportion is not eligible for PPR relief on CGT.

Likewise with TRS but the personal element is likely to be greater than the relief threshold in which case there might be no effect. He wasn't sure on the SD implications. His feeling was that for a sole trader there wouldn't be an issue but that it could be for a company (separate legal entity) but he's going to make some enquiries with someone more expert in the area. It would almost certainly be liable for clawback (if this was applicable) as this applies in any case where rent is received that is not under the rent-a-room scheme.

Finally, in the OP's case he queried the logic of paying rent assessable at the marginal rate to avail of tax relief for a company at 12.5% (he didn't think he'd have much joy claiming it as rent-a-room).
 
See also Here specifically Ch 5, 5 Pg 15 Partial Relief


Partial Relief​
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Full exemption may not be due if only part of the house has been used as the individual’s residence, in which case an apportionment is made to arrive at the exempt portion of the total gain. This may happen where the house is used partly for business purposes or where rooms in the house have been let​

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