So - the previous two posts would contradict FS's earlier post claiming that this rental situation was "fine" and that additional tax implications (for owner occupier mortgage interest relief, SD clawback and/or CGT) should not be an issue?
Renting a room in my own house for business
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FillSpectre
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I rang the tax office and spoke further to my accountant. The tax office said if the business use section does rely on the rest of the building it is exempt. So if the toilet is in the residence it still remains part of the house and exempt from CRT. THe tax office also said the CRt division would have to be made aware.
In theory you can claim anything once they don't audit you so realistically once it all looks resonable it shouldn't ever cause problems. I personally won't take any risks but if people think this is a risk then I am taking a risk. It will always be down to personal judgment as there are ambiguious parts in legislation. Not the use of "may not"
"Partial Relief
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."
If it actually said just "may" it would be certain.
I am going to get it in writing from the tax office what was said to me. It's up to anybody else to do the same or not.
ubiquitous
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Did they give you any guidance on the income tax implications for the householder on rent received from the company? This is imho a far more immediate and serious issue than the possibility of an eventual CGT hit on disposal of the property.
My brother said he is absolutely certain rental income received from a business is assessable at the marginal rate. Even if the rent-a-room scheme does not make specific mention (and I think it does) of it being limited to non-commerical use, it would definitely be against the 'spirit' of the act.
He really didn't fancy anyone's chances of getting away with it so if anyone is actually considering trying it I would write to the revenue for an advance judgement.
ubiquitous
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I would agree with this opinion. This is why I don't really understand how FillSpectre thinks this is some sort of tax-saving plan. I don't see any tax benefit whatsoever except perhaps in very limited cases where a company director earns so little that they are tax exempt - in which case they would probably be subject to automatic Revenue Audit for that reason.
FillSpectre
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It isn't RENT it is an expense. Nobody is charging rent your putting down the expense of having a room used by a business. No income is being recieved therefore no tax. A cost incured is being claimed on.
I urge anybody who wants to do it to satisfy themselves but as with most tax things it depends on the question you ask.
CGT may possibly be an issue ( I have been told it isn't) but are you going to claim the expense for the entire time of the mortgage ? CGT department would also have to go looking and decide so if they catch you it will be 20% on a portion of the property market value as opposed to 41% now on the cost. I would take that as not a bad move.
ubiquitous
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This doesn't make sense. An expense is only an expense if it is paid to someone. In this case the expense is being claimed by a company in respect of use of a room owned by an individual. It is obvious that this is Rent - what else could it be.
ubiquitous
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FillSpectre
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It isn't rent, for it to cost something does not mean it has to be rent.
To avoid double taxation you pay 41% as I discovered. If you have a letter from the tax office staing it is ok I doubt there will be penalties. AS i have said it is up to the individual and what they feel comfortable.
The real question is why are you so bothered? I am telling you what the tax office and an accountant have told me what are you basing yourheated view on? You hounded me on another thread over this so what is your problem?
ubiquitous
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Don't worry. I'm not hounding you. Neither am I getting "heated" about this. I just believe that your opinion on this subject is incorrect (even if based on information from Revenue and/or an accountant). As such, if left unchallenged, it is also potentially misleading to others. That is why I have chosen to debate the issues in further detail with you. You should note that my scepticism is shared by other contributors to this discussion.
I think we might well agree to disagree on this subject...
FillSpectre
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I don't agree to that on the on a really simple grounds.
1) You just claim it is wrong without any foundation or explanation
2) You are telling everybody you are right but not saying to check themselves
3) You decided to ask questions of me on another thread after accusing me of things I never claimed.
I have not claimed to be correct just informed people on what I have been told by accountants and the tax office. I also suggest you check on your own individual basis to be sure.
We can disagree on the belief of what you can and cannot on this matter but on the fact you are talking in a superior manner and shouting people down we won't . You are simply rude, arrogant and a tendency to try to bully people. Not very usefull in a discussion group.
I won't take your advise as you have never given any reason that you know what you are talking about.
Have the Revenue actually put it in writing to you that it is okay for a private company to pay a portion of your mortgage with no income tax considerations for you as an individual?
Btw, I don't ubiquitous is being rude, I just think a lot of people are a little incredulous at this setup and are wondering whether we do not understand it correctly or are somehow misinterpreting your comments.
FillSpectre
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http://www.askaboutmoney.com/showthread.php?t=51601
See what he posted, that is rude.
Don't beleive what I have been told and what I have explained. It is simply an expense is what I have been told. I have checked it to my satisfaction and awaiting a letter from the tax office. Do what you want but at least stae how you know different if you insist I am wrong. Either way you should ask the the taxman yourself if you want to do it. If you aren't doing it why care?
Why do you constantly question the motivations and credentials of people who claim disbelief of your setup? My curiousity has been piqued. My brother works as a tax advisor and several of my acquaintances work in or around this field. When I mention your treatment of your tax affairs they all exclaim complete disbelief that the revenue has sanctioned it. Unless you are paying income tax on the rental income received from your company, in which case they cannot understand why you are doing it this way.
It may be that your comments are being misconstrued but the whole setup doesn't sound very practical. You cannot legitimately claim something as an expense without it actually being an expense. Otherwise every company could reduce its taxable profit to zero very easily. An expense necessitates a payment to another entity. In this case your ltd company is claiming a rental expense. However, this means you as an individual must be in receipt of rent which is assessable as income at the marginal rate. Which begs the question, why go to this effort to reduce the 12.5% corporation tax your company would pay? Unless you have very limited income, would this treatment not simply serve to increase your tax liability?
FillSpectre
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Lets be 100% clear here I have not querstions anybody's credentials as nobody has stated them!
Note the way you have phrased it to your brother is a big part of the issue. I beleive it is an expense as I have without being rent and have been told so.
I am satisfied that I am doing the correct thing in what I am doing and it is not rent. If you are not don't do it I would suggest anybody that may be able to do it to check it out.
Of course it is an expense - the limited company pays a portion of your mortgage ergo it is an expense for the company. The puzzling thing is how on the other side of the balance sheet it is not income for you, the owner of the property.
Still, as long as you are happy with your setup I guess.
Hi,
My other half is my tenent under rent relief scheme and I am first time buyer (bought 1 yr ago). He has recently set up a website and has been working from home for the past few months. He has now register the company as a limited company and he used our address as the company's registered address.
The rent was as it was when he moved in intially - i.e. no extra rent charges for using the place for the business
Is this going to cause me stamp duty issues or problems with my mortgage provider?
Your help is very much appreciated as a little worried now!
My other half is my tenent under rent relief scheme and I am first time buyer (bought 1 yr ago). He has recently set up a website and has been working from home for the past few months. He has now register the company as a limited company and he used our address as the company's registered address.
The rent was as it was when he moved in intially - i.e. no extra rent charges for using the place for the business
Is this going to cause me stamp duty issues or problems with my mortgage provider?
Your help is very much appreciated as a little worried now!
I'm not an accountant but that's the bit I don't understand either. An expense is a good or service that a company buys. In this case it is buying it from the homeowner. Why is that not income?
For example, a business is renting space from an individual who owned an office. That individual had a mortgage on said office. If FillSpectre's scheme is correct then the guy who owns the office in my example doesn't pay income tax on the rent.... because it's an expense!!??
Am I missing something
For the record I have never seen any post by ubiquitous that is anything but constructive and courteous (unlike other posters like, er, me!
)Always seek independent advice of course but I don't think an issue can arise unless he maintains that the rent he is paying is a business expense for the limited company. In which case, it falls outside the remit of the rar scheme. Otherwise, the money he is paying and the purpose for which it is being paid has not changed (i.e. rent from him as an individual for the purpose of accommodation).
G
Guest112
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Fill..... You're wrong mate.