One of our readers has recently been offered a contract role 200 miles away from home. Can he claim the cost of renting accommodation against his limited company’s tax bill?
“I live in North Wales but have recently secured a contract based in the City. The contract is for six months. Daily commuting is not a realistic option (for obvious reasons), but I don’t want to live out of a suitcase during the week by staying at a hotel. Can I rent accommodation near my new contract, and reclaim the costs against the company?”
Thanks to Troy Stevens from Qdos Accounting for answering this question.
The good news is that it is possible for the rental of property elsewhere to be corporation tax deductible and be treated as a legitimate business expense, however, there are certain criteria that must be met in order for this to be legitimate.
Is your rental expense claim a legitimate expense?
For the rental expense to be deemed as legitimate the following criteria must be met:
- You must retain your permanent residence in North Wales, and will not be able to relocate on a permanent basis.
- You must demonstrate that the renting of the property is more financially beneficial than other alternatives. You can compare the price of the monthly rent against the mileage cost of your commute had you to drive from your North Wales to London each day for example. If the cost of the rent and any other bills work out as less than the 45p a mile claim (for the first 10,000 miles, 25p thereafter) of driving each day this would demonstrate the renting of the property as being more beneficial and viable. Similarly, if the cost of an annual train ticket exceeds the cost of the annual rent then this would be seen as reasonable.
- Finally, there can be no personal benefit gained from the renting of the property that would have to be reported on a form P11D. For example, you can’t have family or friends staying at the property. For completeness sake, and where possible, the rental agreement should be in the limited company’s name and the monthly rent paid via your business bank account.
If you can demonstrate and guarantee each of the above then claiming the cost of rent via your limited company could be deemed as a reasonable and legitimate business expense.
Contractor vs. Employee
Your situation is in no way different from that of an employee who is working away from home; in this case, the employer would pay for a place for the employee to stay, and then deduct the cost as an allowable expense from its own taxes.
A contractor is in exactly the same position as an employee when it comes to taking up a second residence and has the right to deductions.