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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4794
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hi! I'm planning to rent an apartment in a city c. 3 hours

Resolved Question:

Hi! I'm planning to rent an apartment in a city c.*****from my main family home, for the sole purpose of having accommodation Monday - Friday for work. Can I get tax relief on the rent and other associated costs (e.g. council tax), as the primary benefit is to be close enough to work? I will travel back to my main family home every weekend, or any time I'm not working.
I am not self employed, and my contract is permanent. I am resident in the UK.
If I can't deduct tax personally, is there anything I can do by renting the flat through an existing Ltd. service company, and personally paying rent to the company only for the days I am resident? This is only likely to be c. 15 days per month, as I travel globally for at least 1 week per month.
Thanks!
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Accommodation costs paid for by the employer are normally regarded as a perk or benefit in kind and are taxable to income tax. There are exceptions to it but I'm sorry to say your circumstances don't fall in the exceptions category... no tax will have to be paid on the accommodation if:

- it is necessary for you to live in the accommodation to perform your duties properly, for example, if you are a school caretaker, or

- it is provided so that you can perform your duties better than you could without it and it is customary in that type of employment to have accommodation provided, for example, if you are a police officer, or

- the job involves a special security risk and special accommodation is provided for your safety, for example, if you are in the armed forces.


Costs are are not paid back to the company would be reported as benefit in kind and subject to tax and NI.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Hi,

Perhaps I was unclear - my employer will not be covering the cost of this, I will be covering the cost personally. As such, it is a tax deduction question, not benefit-in-kind.

Thanks!

Expert:  taxadvisor.uk replied 2 years ago.
Dave, thank you for your reply...

Unfortunately, this is deemed cost of convenience (private expense - instead of travelling from home to main place of business, you are renting accommodation nearer place of work) and as such there is no tax relief available, similar to commuting cost that are also not allowable for tax relief purposes.

I am sorry, the news is not good from your point of view

I hope this is helpful..
Customer: replied 2 years ago.

Thanks for the update.

So if there is no personal relief available, is renting the apartment through a ltd company, and paying a pro-rated daily rate to the company for the days it is in use (roughly 50% of the time) a legitimate strategy? This would presumably give a corporation tax relief on the unused time (since costs would be more than the daily amounts charged) and would not incur BIK since it's being paid at market rate?

Thanks!

Expert:  taxadvisor.uk replied 2 years ago.
Dave, thanks for your reply...

You have to work out the economic benefit of doing so.
As far as the company is concerned, it would be an allowable expense if expenditure is incurred wholly and exclusively for business purposes.

You reimbursing the company in full for private use would not make it a BIK to you.

I hope this helps.
Customer: replied 2 years ago.

Hi,

I'm unsure what you mean by working out the economic benefit of doing so. What are the considerations?

As an example, say the rent is £500 per month, and assume a month has 30 days and there are no other costs.

The company pays £500 rent, I would pay £250 to the company for the days when the flat was used (15 days). This would leave the ltd company with a £250 loss per month, which would be a tax write-off (corporation tax), assuming the company has other income, which it does.

Are there other considerations here that I am missing? Is there anything wrong with this structure?

Thanks!

Expert:  taxadvisor.uk replied 2 years ago.
Dave, there is nothing wrong in the structure.

If the cost of 15 days use otherwise would be greater than 50% of the rental and associated costs then it makes economic sense.

I hope this is helpful.
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4794
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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