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!
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!
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