Most tax-efficient option: living in rented or owned property in London? Most tax-efficient option: living in rented or owned property in London? - Page 2
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  1. #11

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    I had a good long discussion with my accountant over e-mail about this, and she put it into very good perspective for me. By living in rented accommodation, I can recover 20% of my rent as tax-deductible on corporation tax, which is more than the income tax I would have to pay on the rental income I get from my owned property once mortgage interest has been deducted before tax. So, I make a profit. However, this eats into my lower income tax rate band and it means more of my dividend income will be in the higher tax rate band. Therefore, the financial benefit is minimised.

    However, my accountant has also advised me caution because I am renting a property and putting the rent expenses through the business when I have an owned property nearby that I could live in. Therefore, I am claiming travel expenses and subsistence Mon-Fri continuously based on my Surrey property being my 'home' base. My accountant has said that an HMRC inspector might question why I am not living in my owned property and claim that I am doing it for tax avoidance purposes (which the figures earlier would refute this suggestion anyway).

    There are two overriding reasons why I am renting at the moment rather than living at my owned property. Firstly, I purchased the property in March while contracting outside of London and booked Olympics tenants into it till September before I became aware I would be contracting again in London (from April).

    Secondly, and I think this is the more pertinent reason, I am making a personal profit on the property from Olympic rentals. I spoke with some fellow colleagues yesterday and their opinion was that the property is owned by me and therefore I can do what I like with it, and if I choose to rent it out, particularly for the profit I will make on the Olympics, that is my personal choice. If my business, of which I am an employee, then has a contract near to that property and the property is unable to be lived in due to my personal choice on how I wish to use that property (to rent out for personal profit), then renting elsewhere is a valid arrangement. If I did it purely to claim meals, then I agree with my accountant, this could be viewed as tax avoidance. But, if I am making a personal profit by renting the property out (especially from the Olympics), and this is something I would do even if I was in a permanent job (which I would do), then I don’t see why this would be a problem. Why should I live there and sacrifice the Olympics opportunity to make a personal profit just because I run a business contracting in London? That way, the business would effectively be costing me money due to feeling like I have to live at the property and lose out on the Olympic rentals which I would cash in on if I were not contracting!

  2. #12

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    Quote Originally Posted by Neo View Post
    I didn't say I would be claiming the rent indefinitely. And even if I did, I fail to see why you feel the 2-year rule - which I'm aware of - applies here.
    Quote Originally Posted by JamJarST View Post
    Good point, this isn't travel so wouldn't be an issue, ignore me I was having and brain dead moment
    The two year rule would still apply. After two years it would no longer be a temporary work place and you could no longer claim living expenses to be near to it.

  3. #13

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    Quote Originally Posted by Neo View Post
    Secondly, and I think this is the more pertinent reason, I am making a personal profit on the property from Olympic rentals. I spoke with some fellow colleagues yesterday and their opinion was that the property is owned by me and therefore I can do what I like with it, and if I choose to rent it out, particularly for the profit I will make on the Olympics, that is my personal choice. If my business, of which I am an employee, then has a contract near to that property and the property is unable to be lived in due to my personal choice on how I wish to use that property (to rent out for personal profit), then renting elsewhere is a valid arrangement. If I did it purely to claim meals, then I agree with my accountant, this could be viewed as tax avoidance. But, if I am making a personal profit by renting the property out (especially from the Olympics), and this is something I would do even if I was in a permanent job (which I would do), then I don’t see why this would be a problem. Why should I live there and sacrifice the Olympics opportunity to make a personal profit just because I run a business contracting in London? That way, the business would effectively be costing me money due to feeling like I have to live at the property and lose out on the Olympic rentals which I would cash in on if I were not contracting!
    Its not us you have to convince its the tax man.

    Its a nice idea to say "well its not me its my company" and that is seperate from me and my bastard of a boss forces me to work away etc. I'll give you one guess how long HMRC will spend seeing through that.

  4. #14

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    Quote Originally Posted by Sockpuppet View Post
    The two year rule would still apply. After two years it would no longer be a temporary work place and you could no longer claim living expenses to be near to it.
    To be pedantic, it's as soon as you know that you are going to be working in the same location for two years that you stop claiming.
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  5. #15

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    Quote Originally Posted by Neo View Post
    My accountant has said that an HMRC inspector might question why I am not living in my owned property and claim that I am doing it for tax avoidance purposes (which the figures earlier would refute this suggestion anyway).

    There are two overriding reasons why I am renting at the moment rather than living at my owned property. Firstly, I purchased the property in March while contracting outside of London and booked Olympics tenants into it till September before I became aware I would be contracting again in London (from April).
    I think this is the more important one - you cannot use the property yourself because it is rented to other people. If it wasn't rented to other people, then you would stay there.
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  6. #16

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    Quote Originally Posted by Neo View Post

    Secondly, and I think this is the more pertinent reason, I am making a personal profit on the property from Olympic rentals. I spoke with some fellow colleagues yesterday and their opinion was that the property is owned by me and therefore I can do what I like with it, and if I choose to rent it out, particularly for the profit I will make on the Olympics, that is my personal choice. If my business, of which I am an employee, then has a contract near to that property and the property is unable to be lived in due to my personal choice on how I wish to use that property (to rent out for personal profit), then renting elsewhere is a valid arrangement. If I did it purely to claim meals, then I agree with my accountant, this could be viewed as tax avoidance. But, if I am making a personal profit by renting the property out (especially from the Olympics), and this is something I would do even if I was in a permanent job (which I would do), then I don’t see why this would be a problem. Why should I live there and sacrifice the Olympics opportunity to make a personal profit just because I run a business contracting in London? That way, the business would effectively be costing me money due to feeling like I have to live at the property and lose out on the Olympic rentals which I would cash in on if I were not contracting!
    Do you think HMRC is going to be happy that you make a profit from your property while claiming tax breaks to live for your contract? You still have to have a 'home' base to get tax breaks when you are away. By renting your home base out for profit, the place you live will be your home base so no expenses would be allowed. It is for 'staying away' not a second place to live while you rent your house out.

    This looks more like something the MP's do IMO and to be well avoided.
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  7. #17

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    Quote Originally Posted by northernladuk View Post
    Do you think HMRC is going to be happy that you make a profit from your property while claiming tax breaks to live for your contract? You still have to have a 'home' base to get tax breaks when you are away. By renting your home base out for profit, the place you live will be your home base so no expenses would be allowed. It is for 'staying away' not a second place to live while you rent your house out.

    This looks more like something the MP's do IMO and to be well avoided.
    Who said anything about me renting out my 'home' base??

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    Quote Originally Posted by Neo View Post
    Who said anything about me renting out my 'home' base??
    How many properties do you have? From your post it sounds like 1 in Surrey and 2 in London - assuming that this is correct, can you confirm that you rent one to live in during the week and own one which you rent out? Does your Surrey property then stand empty during the week?
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  9. #19

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    Quote Originally Posted by northernladuk View Post
    Do you think HMRC is going to be happy that you make a profit from your property while claiming tax breaks to live for your contract? You still have to have a 'home' base to get tax breaks when you are away. By renting your home base out for profit, the place you live will be your home base so no expenses would be allowed. It is for 'staying away' not a second place to live while you rent your house out.

    This looks more like something the MP's do IMO and to be well avoided.
    Until the fixed term part of the tenancy contract is up then Neo has no choice but to rent elsewhere as you cannot kick tenants out. *

    After this then it may be an issue.

    *Well you can but you may end up with a suspended prison sentence for illegal eviction.
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  10. #20

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    Quote Originally Posted by LisaContractorUmbrella View Post
    How many properties do you have? From your post it sounds like 1 in Surrey and 2 in London - assuming that this is correct, can you confirm that you rent one to live in during the week and own one which you rent out? Does your Surrey property then stand empty during the week?
    From the posts s/he has:
    1. Home in Surrey
    2. Flat in London which s/he owned and is rented out to tenants who s/he can't kick out until the fixed term is up.
    3. Flat in London s/he rents to live in during the week whilst on this contract. (From previous thread s/he has difficulty travelling.)
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