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bigduckontax, Accountant
Category: Tax
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Benefit of kind As a director of uk company and sole owner

Customer Question

Benefit of kind
As a director of uk company and sole owner owning property, would like to live in a property owned by the company, can you advise what is the benefit in kind tax implication? do i have to pay the rent? can the company provide a discounted rate not as a benefit but as a genuine reason for discount (i.e. keeping the property better, no void period, management fees etc)
Submitted: 4 years ago.
Category: Tax
Expert:  bigduckontax replied 4 years ago.
Hello, I'm Keith and happy to help you with your question, however the answer is not very good news for you as an individual.

As you probably know a director of a company is an employee of that company per see and there is no way out of that. Thus to live in rent free would be a benefit in kind. At a discount might be permissible if it were say in a caretaker role. As you can imagine this is a Tom Tiddler's Ground for tax evasion and HMRC would look very carefully at the circumstances involved before not treating it as a benefit in kind. I would advise you to have the tenancy agreement including any duties devolved upon you drawn up by a solicitor to protect your from possible investigation.

There is an exemption for low income persons, but it does not apply to directors. The one loophole for you is to be declared by the company as the caretaker of the property and you must live in the accommodation in order to perform your duties properly. I have to warn you however that HMRC are likely to look askance at any such arrangement.

The only real light I can see at the end of this rather gloomy tunnel concerns the value of the benefit. Here is some guidance for you as published by the CAB:


Generally, if you’re provided with accommodation either rent-free or for a rent which is below market rent, the difference between the rent you pay, if any, and the annual value of the property is taxable.

Below market rent means below what you would normally expect to pay to rent a similar property.

Annual value is usually taken to be the same as gross rateable value. It does not matter whether you are lower-paid or not – the benefit is taxable.

An extra charge will be made if the accommodation cost more than £75,000 when it was bought by the employer.'

This extra charge for properties over GBP 75K merely substitutes the market rent for annual value for rating purposes.

I hope I have been able to shed some light on the subject.
Customer: replied 4 years ago.

Thanks for reply

Can you advise what is the tax amount if say the rental value is 70k per year?


"This extra charge for properties over GBP 75K merely substitutes the market rent for annual value for rating purposes."

I confirm the property at time of purchase was more than 75k ( i assume most properties in uk are) , is there addition tax as consequence?



Expert:  bigduckontax replied 4 years ago.
Well, it's as long as the proverbial piece of string because it depends on your personal circumstances. The benefit in kind is added to any other income you may have and the whole shooting match charged as follows:

Income from shares is taxed at 10% up to GBP 2560, but if you go into higher rates tax is grossed up to 32.5%.

The rest is taxed at:

0 - 35000 - 20%

35001 - 150000 - 40%

over 150000 - 50%

As the property was over the 75K then the market rent must be used to calculate the benefit in kind either at the rent free rate or the discounted rate as I explained earlier.
Expert:  bigduckontax replied 4 years ago.

I should have mentioned, of course, that you do have your personal allowance to reduce the total for tax plus any other expenses like professional subscriptions etc and also, if you have a job, pension contributions.