Can my company pay my rent for the use of my home?

If you work from home and have a company that is based in your home, the short answer will be yes. Directors are allowed to charge rent to the company for the occupation of the property.

Firstly, it may be worth thinking about formalising an arrangement within your company to rent part of your residence to the company to occupy for business use. The benefit of this is that by charging the company rent, the company’s corporation tax bill can then be reduced.

What do I need to do?

To start with, you need to be aware that you can’t charge your limited company rent unless there is sufficient evidence of the arrangement, so you will need to set up a formal rental agreement in some form between yourself and the limited company.

This may sound complicated, but it is a fairly quick and easy process as there is plenty of templates available online.

Some important things to consider:

• Ensure that you have a Board Minute recording the agreement.
• Providing the rental agreement clearly sets out that the company will not have exclusive use of that part of the home then this arrangement will not create capital gains tax implications if you sell the property in the future.
• Directors should also ensure that their mortgage lender or landlord permits the property to be used for business purposes and that the household insurance is not adversely affected.

But how much should I charge?

It is a great idea to do some research before deciding this, as you want to make sure the price can be justified, it should not be in excess of commercial market rental values of serviced office space.

If the amount charged to the company (that is then paid to you), exceeds household costs that you have personally incurred for that area of space, you will be taxed on the difference (rental profit).

Step 1: Work out the annual costs of running your home and consider expenses such as rent/mortgage interest, water rates, energy bills, insurance, repairs, cleaning etc.

Step 2: Your rent charge should include all the services above that are used for the company. Make sure you think about telephone costs also, as you will only be able to claim for the use of business calls.

Still have questions? Your accountant will be able to help you based on your specific circumstances. Get in contact with use today and we will be more than happy to help.