Ltd Company Home Office Expenses

[Trojan Horse]

I am thinking of setting up a limited company to do freelance software work in evenings and weekends. Also to train for PfCO certification to carry out drone work commercially (mostly just real estate footage).

I would need to work in my home office (second living room) and occasionally my garage. I know that if I was sole trader I could claim expenses for a lot more.

However, as I have (3 bed, 2 living room, 1 kitchen) 6 room house, I could calculate fees based on 1/6th of the house hold bills (approximated based on the time spent in the office, so 90% office would be working and 10% family would use it, garage would be 10% office 90% nobody uses it) how would it work for the garage? Do I just add the garage as an extra room, making it 1/7th?

What expenses can I actually claim for? Accountants say Gas + Electric but the .gov.uk website states fixed costs would work as well: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47825

As I do not own the home (living with parents) can I just get charged a monthly bill of gas + elec from parents to the ltd co? Or can my parents charge me market value rent for the usage?

For example:
Gas+ Elec is £200 per month
Home office is 1/6th = £33.33
Usage is 90% = £30

Parents charge me £30 a month for bills? Can they not charge me for the actual rent, as I would have had to rent an office space otherwise?

Using this infographic - https://www.freeagent.com/guides/expenses/working-from-home-expenses-limited-companies/

 

[booyaka]

Unless i've misunderstood you - you live with your parents??

If that's the case, you can't claim anything really. You don't own the property (it's your parents), so how can you charge a Ltd company for bills/rent when your not paying anything for the property yourself?

If anything, your parents should be charging the Ltd company for the use of the premise.

Do you need a Ltd company at this time? Why not just sole trader - What are you gaining from becoming Ltd at this time?

 

[Trojan Horse]

Unless i've misunderstood you - you live with your parents??

If that's the case, you can't claim anything really. You don't own the property (it's your parents), so how can you charge a Ltd company for bills/rent when your not paying anything for the property yourself?

If anything, your parents should be charging the Ltd company for the use of the premise.

Do you need a Ltd company at this time? Why not just sole trader - What are you gaining from becoming Ltd at this time?

Yes, thats what I am saying... I outlined at the bottom of the OP. Can my parents charge the ltd company for bills and rent as I do not own the property.

I feel like learning how to manage a ltd would be better practise esp as I intend to go contracting in the future and want to limit exposure

 

[booyaka]

Yes, thats what I am saying... I outlined at the bottom of the OP. Can my parents charge the ltd company for bills and rent as I do not own the property.

I feel like learning how to manage a ltd would be better practise esp as I intend to go contracting in the future and want to limit exposure

I guess your parents could charge for it but seems a lot of hassle as they would then technically have additional income from a "rental" property. You need to factor in that they would "potentially" have to declare that income and may incur additional tax issues etc. Also house insurance considerations if they are renting to a Ltd company. Business insurance, property insurance etc?

Seems a lot of hassle to involve your parents in. Personally just don't bother with it for the tiny amount of savings you would actually have. I think your over thinking it for now.

If going Ltd, i would strongly suggest an accountant to deal with it all - however as above - Sole trader to start with, no need to jump in Ltd at this stage unless there was a strong case for it.

 

[Trojan Horse]

I guess your parents could charge for it but seems a lot of hassle as they would then technically have additional income from a "rental" property. You need to factor in that they would "potentially" have to declare that income and may incur additional tax issues etc. Also house insurance considerations if they are renting to a Ltd company. Business insurance, property insurance etc?

Seems a lot of hassle to involve your parents in. Personally just don't bother with it for the tiny amount of savings you would actually have. I think your over thinking it for now.

If going Ltd, i would strongly suggest an accountant to deal with it all - however as above - Sole trader to start with, no need to jump in Ltd at this stage unless there was a strong case for it.

My parents make under the tax free limit would it wouldn't be taxed. The additional income would be around 3-4K per year which is a decent chunk.

 

[booyaka]

My parents make under the tax free limit would it wouldn't be taxed. The additional income would be around 3-4K per year which is a decent chunk.

your "potential" income is £3 to £4k a year??

If so, forget about Ltd. Totally not worth it. If you are not paying an accountant then you need to do at least the following yourself:

setup

• Memorandum of Association – limited company name, location, business type
• Form 10 – director’s names, addresses and registered limited company address
• Form 12 – states the limited company complies with terms and conditions of the Companies Act
• Articles of Association – outlines director’s powers, shareholder rights etc. (this is often provided by the formations company that sets up the limited company).

ongoing annually

you have certain duties and legal responsibilities. These include:

• Your newly set up limited company must be registered at Companies House
• Annual accounts and Confirmation Statements must be completed and filed with Companies House every year.
• HMRC must receive your accounts every year
• An annual Corporation Tax return must be completed and any tax owed must be paid to HMRC within nine months and one day of the limited company year end.
• Register for Self Assessment and send a personal tax return to HMRC every year (this requirement does not apply if your company is a non-profit organisation, such as a charity, and you didn’t get any pay or benefits).
• Follow the company’s rules, as shown in its articles of association
• Keep company records and report changes
• Tell other shareholders if you might personally benefit from a transaction the company makes

all for 3-4k a year - Sole trader, add to any other income you have, complete a tax return, job done.

 

[Trojan Horse]

your "potential" income is £3 to £4k a year??

If so, forget about Ltd. Totally not worth it. If you are not paying an accountant then you need to do at least the following yourself:

setup



ongoing annually



all for 3-4k a year - Sole trader, add to any other income you have, complete a tax return, job done.

No, the rent would be an additional 3-4K year...

What if anything goes wrong with the software I build? I'm personally liable as a sole trader.

 

[Quartz]

As I do not own the home (living with parents) can I just get charged a monthly bill of gas + elec from parents to the ltd co? Or can my parents charge me market value rent for the usage?

Be very, very careful here and get proper advice. What you suggest may not be allowed by your parents' mortgage, could affect their council tax, and could affect their ability to sell on the property free of Capital Gains Tax.

 

[booyaka]

No, the rent would be an additional 3-4K year...

What if anything goes wrong with the software I build? I'm personally liable as a sole trader.

I've very confused - where do you get a figure £3-4k rental for a bedroom/garage?? I work from home (fulltime), my own home and have an accountant and a LTD company - My company pays rent after discussing this with my accountant - it's nowhere in the region of £3-4k!!

I can't see how HMRC would allow expenses for rent in the thousands on a property that is own by your parents, which you live in rent free. If your parents start charging the company a rent, then surely HMRC would ask why your parents aren't charging you as a individual, rent at the market rate. You can't have it both ways.

As I've said - there are lots of other issues you need to consider before you start getting your parents to charge rent to a business. Many many other things.

You need to get the business up and running first. Zero point having a Ltd company and earning nothing via it.

You appear to be all set on working out your expenses/rental issues/ LTD company - yet you've got nothing as a business yet.

No earnings, no sales, no software etc.

 

[Jokester]

You would need to speak to an accountant about this.

You can claim £208 a year home office expenses without invoices, anything above that you would need to demonstrate that the expense is justifiable and back it up with legitimate invoices and as Quartz mentions this can have knock on effects to your parents, so speak to an accountant if you really want to persue it.

 

[Axeboy]

Agree with above too, this is what I do

Plus mobile bill of course and 50% of my broadband fees. That's about it from a bills point of view and I work from home or in my garage.