Are you planning on renting a house or flat on contract that is near your worksite? You may need to do this while you are working away on the contract. The question is a common one as the costs can be quite expensive depending on where you are staying. Therefore, let us go back to the question of why I decided to write this article in the first place. Are these costs actual business expenses that are claimable through your UK company? Let us take a look into this and find out.
I have a separate guide that covers relocation costs -this covers where you are actually moving your primary place of residence.
As a UK contractor, you may, at times, need to travel for your contract work. Depending on your work, on some occasions, the journey could be quite a commute. If this is the case, it may prove to be more practical to stay over near your worksite while you are working there. A journey there and back each day may prove to be too much, especially given how busy the motorways can get during the working week. If this is so. you may prefer to stay closer to your worksite until the working week comes to a close.
Therefore, are you able to claim for the cost of renting a house or flat near to your contract site? What’s more, are you also able to claim the utility costs for the house or flat? Also, what about the food costs be these eating out or eating at the property where you are staying.
The goods news here is you can claim these costs as business expenses. In turn, your business will save the Corporation Tax on these. The claims will, however, be dependent on you meeting certain tests.
Depending upon the type of work that you do, you may be able to claim for your business clothing, however there are certain rules on what you can claim.
What to consider
First of all, the rental property that you are staying in must not be for your permanent place of residence. Further to this, you must continue to have your main residence. What’s more, this should not be close to your contract site. If this is the case, you can now claim for a house or flat near to your new worksite.
HM Revenue & Customs (HMRC) could challenge this claim at some point. If they did, you must be able to show that it is more financially beneficial to stay in temporary digs near to your work site.
Comparing the costs
Your company may, at some point, undergo an HMRC inquiry. As part of this, you would need to try and show that these expenses are necessary. You could, therefore, compare the monthly cost of the rent and utility bills against the cost of the mileage to get you to the site. When you claim for business mileage, you will claim for these under HMRC’s approved rates. The available rates are 45 pence for the first 10,000 miles and 25 pence after that. On the other hand, you could compare these against the cost of monthly rail costs to get you to the site. The total cost of the property rental and utility expenses should come to less than the mileage or rail costs. If it does, you would be able to demonstrate that this is more financially beneficial.
It is also important to be able to show that there is no personal benefit derived from renting the property for your contract. Therefore, you would need to demonstrate that you are renting this purely for work reasons. Furthermore, you would not be able to have friends or family staying there. If you did, personal usage/benefit would require reporting on form P11D.
When renting a house or flat, you must get the rental agreement in your company’s name. The same applies to the associated utility costs. Doing this will demonstrate that the cost is one of your company rather than you.
It would also be advisable to ensure that your company pays these bills. Set the rent and utility payments upon your company account as opposed to your account.
If you can demonstrate and do all of the above, these expenses will be claimable as business expenses via your company.
What you can claim
In terms of food, you will be able to claim your meals out while working away as long as these are not `excessive.’ If during your time away, you will usually be eating at your rented property, you could claim for your shopping bills. To do this, you should ensure that you do not include personal items on your shopping visits. You, therefore, need to be careful here; otherwise, you will need to separate personal items when making the claims through your company!
Claiming for temporary accommodation and the associated utility and food costs for work reasons can, therefore, be allowable expenses. There is also a difference between how business meals and meals that are of an entertaining type nature are treated for tax purposes. All of your travelling type costs are subject you not falling foul of the two-year rule.
Many contractors in all sorts of industries will stay away from home overnight for work reasons during the week. Many of those will also prefer to be renting a house or flat on contract. When you compare this to staying in a hotel or B&B guesthouse, the latter can cost more. If you follow the guidelines above, you can claim these costs through your company. In turn, your business will receive tax relief. You should note that the term `receive tax relief’ means your company will save the company tax at 19%. In turn, this also means that your company will pick up this cost. To sum up, this is better than you picking this up personally out of your already taxed personal income.