Renting two properties - Can I claim rent in full for one property?

[NoviceContractor]

Hi,

I am working through my own Limited Company and I am out of IR35. My wife is also the director of this company and getting salary and dividends from it.

I have been renting one property in London for last 4 years.
I have recently got my first contract and moved to Edinburgh but I have not left the First property and still paying the rent for that.
So I am paying rent for two properties. Both the rent is going from my personal bank account.
I have not left the London property as I want to go back to London in few months time. So I have rented my second property purely because I need to carry out this contract.

My family is currently living with me in Edinburgh and planning to go back to London even before I finish my contract in Scotland.
My question is:
1. Can I claim my Edinburgh property rent in full? please clarify with the reason.
2. Can I claim other daily household expenses as well? if not then what else can I claim as the purpose of the second property is purely to assist me in carry out my contract so I may be allow to claim other expenses but I am not sure what else I can claim?

Please help.

Thanks & Regards,

[Greg@CapitalCity]

When you undertake business travel, the cost of the journey, together with the associated costs of subsistence and accommodation will be allowable for tax. So as long as your workplace is a temporary one (and by the sounds of things it is), then travelling to Edinburgh will be business travel, and the cost of accommodation while you are up there will be claimable.

The only way I could see therefore that you couldn't claim the cost of your Edinburgh accommodation in full, is if you have gone and rented a 5 bedroom house with a pool so the family can enjoy themselves while you work. So as long as the accommodation is appropriate to the business need, and is not excessive, the claim will be fine.

Claiming other household expenses? Well, so long as its a business trip, you can claim all associated costs of the property you rent, subsistence, as well as incidental costs, such as purchase of newspapers, phone calls toiletries etc.

[northernladuk]

The only way I could see therefore that you couldn't claim the cost of your Edinburgh accommodation in full, is if you have gone and rented a 5 bedroom house with a pool so the family can enjoy themselves while you work. So as long as the accommodation is appropriate to the business need, and is not excessive, the claim will be fine.

But he is living there full time with his family. This means it is not wholly and exclusively for business use so he can't claim or at least pay BIK on it? He lives in it 2 days at weekends which are not work days so how can he claim that?

[rd409]

When you undertake business travel, the cost of the journey, together with the associated costs of subsistence and accommodation will be allowable for tax. So as long as your workplace is a temporary one (and by the sounds of things it is), then travelling to Edinburgh will be business travel, and the cost of accommodation while you are up there will be claimable.

The only way I could see therefore that you couldn't claim the cost of your Edinburgh accommodation in full, is if you have gone and rented a 5 bedroom house with a pool so the family can enjoy themselves while you work. So as long as the accommodation is appropriate to the business need, and is not excessive, the claim will be fine.

Claiming other household expenses? Well, so long as its a business trip, you can claim all associated costs of the property you rent, subsistence, as well as incidental costs, such as purchase of newspapers, phone calls toiletries etc.

IANAA/IANAL. Can you prove, if required, that your family was based in London, and used to visit you occasionally? If not, then you are better off not claiming this as an expense. It is always easier to prove a temporary accommodation, if you are travelling back during weekends or frequently to your permenant location. In your case, this would not be possible, so I guess you are just inviting trouble.

Having said that, if the flat is just a 1 bed flat, and of lower spec than your residence in London, then it would probably be below the radar, and you wont be required to specify who occupies the property. I guess, it is better to speak to your accountant and follow what s/he suggests.

HTH.
Dave.

[NoviceContractor]

IANAA/IANAL. Can you prove, if required, that your family was based in London, and used to visit you occasionally? If not, then you are better off not claiming this as an expense. It is always easier to prove a temporary accommodation, if you are travelling back during weekends or frequently to your permenant location. In your case, this would not be possible, so I guess you are just inviting trouble.

Having said that, if the flat is just a 1 bed flat, and of lower spec than your residence in London, then it would probably be below the radar, and you wont be required to specify who occupies the property. I guess, it is better to speak to your accountant and follow what s/he suggests.

HTH.
Dave.

I have spoken with my accountant and he said that I can claim my Edinburgh property rent in full as I have taken this property to carry out my contractbut I am not satisfied with what he says as he himself is not fully confident for what he is talking about.
Anyway, both the properties are 2 bedroom flats but th eEdinburgh property carpat area is little less (do not know exactly how much but it certainly is) than London one. The flat is an average flat and does not have any luxaries as such.I am not travelling back to London on weekends rather staying in Edinburgh.

My wife and son are not registered with any goverment body in Edinburgh rather in London and the Edinburgh flat contract,Council tax and all utilities are on my name.
All communication for my wife from London council and banks are coming to London flat.

The initial work contract is for 6 months and may extend as well. Though I am looking for work in London and my intentions are to shift to London as soon as I get a decent work but until then I will continue in Edinburgh. If it takes too long for me to find work in London then I will leave the London flat.

How does in this case someone can prove that my family is staying with me in Edinburgh at first place ?

Also, if I claim the rent in full and if HMRC raises their eyebrow in future then what worst can happen ?

What are my options/ what is legitimate for me to claim ?

Thanks.

[rd409]

I have spoken with my accountant and he said that I can claim my Edinburgh property rent in full as I have taken this property to carry out my contractbut I am not satisfied with what he says as he himself is not fully confident for what he is talking about.
Anyway, both the properties are 2 bedroom flats but th eEdinburgh property carpat area is little less (do not know exactly how much but it certainly is) than London one. The flat is an average flat and does not have any luxaries as such.I am not travelling back to London on weekends rather staying in Edinburgh.

My wife and son are not registered with any goverment body in Edinburgh rather in London and the Edinburgh flat contract,Council tax and all utilities are on my name.
All communication for my wife from London council and banks are coming to London flat.

The initial work contract is for 6 months and may extend as well. Though I am looking for work in London and my intentions are to shift to London as soon as I get a decent work but until then I will continue in Edinburgh. If it takes too long for me to find work in London then I will leave the London flat.

How does in this case someone can prove that my family is staying with me in Edinburgh at first place ?

Also, if I claim the rent in full and if HMRC raises their eyebrow in future then what worst can happen ?

What are my options/ what is legitimate for me to claim ?

Thanks.

The risk is only if you are audited for PAYE. I think with HMRC, you are guilty unless proven innocent, so if the stint is for shorter term, then you can claim that it was a wiser decision to stay in a flat rather than hotel. There was some discussion regarding whether having an access to kitchen affects the claim, but is a grey area, so dont worry about it atm.

If HMRC investigates, the worst that happens, is the entire amount is classed as salary/income, so you pay tax + penalty + interest on it.

As per the other information, it would be easier for you to prove, that your family was based in London, and you were in Edinburgh only for business purpose. But IANAL/IANAA.

[NoviceContractor]

The risk is only if you are audited for PAYE. I think with HMRC, you are guilty unless proven innocent, so if the stint is for shorter term, then you can claim that it was a wiser decision to stay in a flat rather than hotel. There was some discussion regarding whether having an access to kitchen affects the claim, but is a grey area, so dont worry about it atm.

If HMRC investigates, the worst that happens, is the entire amount is classed as salary/income, so you pay tax + penalty + interest on it.

As per the other information, it would be easier for you to prove, that your family was based in London, and you were in Edinburgh only for business purpose. But IANAL/IANAA.

Thanks for your reply.

What is IANAL/IANAA ?
What can be the penalty ? Any idea based on what you have seen earlier .

Can I also claim for gas, electricity, council tax, phone, broadband, daily food, substinance(£ 5 per day), etc...? If yes, is there any limit on how much I can clami for each of these type of expenses ?

Thanks.

[rd409]

Thanks for your reply.

What is IANAL/IANAA ?
What can be the penalty ? Any idea based on what you have seen earlier .

Can I also claim for gas, electricity, council tax, phone, broadband, daily food, substinance(£ 5 per day), etc...? If yes, is there any limit on how much I can clami for each of these type of expenses ?

Thanks.

IANAL = I Am Not A Lawyer.
IANAA = I Am Not An Accountant.
(This is to warn, that the advice comes from a fellow contractor, and not a professional)

The penalty used to be capped at 100% of the total tax due, but not any more. It usually depends on the Tax Inspector, but I have not had any encounters, so I am not sure how this works. Your accountant might be in a good position to estimate. Interest on the tax and penalty, is usually quoted on HMRC websites, you can google that easily.

I think you can claim for most of the utilities, but I am not sure about the council tax. If you are working away from home (permanent base), you can claim subsistence. Most of the accountant do not require receipts for the later, but I would advise to keep them, just in case. It shows the business follows good practice.

HTH (Hope that Helps).
Dave.

[NoviceContractor]

IANAL = I Am Not A Lawyer.
IANAA = I Am Not An Accountant.
(This is to warn, that the advice comes from a fellow contractor, and not a professional)

The penalty used to be capped at 100% of the total tax due, but not any more. It usually depends on the Tax Inspector, but I have not had any encounters, so I am not sure how this works. Your accountant might be in a good position to estimate. Interest on the tax and penalty, is usually quoted on HMRC websites, you can google that easily.

I think you can claim for most of the utilities, but I am not sure about the council tax. If you are working away from home (permanent base), you can claim subsistence. Most of the accountant do not require receipts for the later, but I would advise to keep them, just in case. It shows the business follows good practice.


HTH (Hope that Helps).
Dave.

Thanks dave.

Regards,

[northernladuk]

I presume the further questions about how do they know abour your family you are looking at trying to evade paying what your are supposed to by not claiming it. Good luck with that, on your head be it.

If you are relocating your family to Edinburgh, which it appears you are doing then fine. If you want to keep paying the rent on the flat in London because you would like to keep it, also fine. To reclaim the Edinburgh flat just so you can keep the London on is not fine. Keep your nose clean and pay/claim what is due, not what suits your schemes.

Personally I don't think the attitude of how do I hide the fact my family is there and what is the worst that will happen to me if I try and screw HMRC over is the correct one. The wording in RD409's mail is correct, but I don't think it gives the right impression of what will happen to you when it all goes wrong. You are talking about £1K per month for 6 months with increased costs they will want back of you pretty pronto. If you can keep that kind of money in your bank for that rainy day then fine but most people don't and will be in a whole heap of trouble when a 10K tax bill hits the floor.

Pay/claim what you are supposed to, keep your nose clean and let you (and your family) sleep soundly at night.