Renting as a contractor and working away from home on contract.

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Introduction 

You may occasionally contract away from home or regularly as a limited company contractor or consultant. What’s more, working away could be a requirement of your current UK contracting ongoing arrangements. Indeed, you may be working away from family for several days or the whole working week. Therefore, you may plan on renting a house or flat on contract while you’re there. Renting a property on contract could be renting a flat or house near your current contract location. Depending on the length of your engagement, you might rent away from home for a specific period when renting as a contractor. What’s more, when renting property on contract, what else should you consider?

When working away from home during the week and staying in a house or flat, can you claim the rental accommodation and work away costs as business expenses? You may occasionally make business trips when conducting contract work away from home. Moreover, some contract locations could be far from where you live. Alternatively, you may start working at a contract site, which involves travelling a fair distance and staying there most of the week.

If you work away as part of a business trip, you may have to stay there overnight. Indeed, when you’re a contractor staying away from home overnight, a hotel room or B&B is the obvious choice. However, leasing a house or flat may be less costly if you contract there for several months. Consequently, searching for longer-term accommodation for contractors is less expensive. This guide will research the costs involved in renting a house or flat and what’s tax-deductible regarding your contractor property.

Initial thoughts on renting as a contractor 

Do you perform work away from home? 

As a UK contractor, sometimes you may have to travel for your contracting work. As part of this, you’ll incur travel expenses. Depending on your contract, the journey could be quite a commute on some occasions. If this is so, it may be more practical to stay away overnight and find some working accommodation near your contract location. Therefore, staying in a hotel or using stay-away rentals near your contract site is best while you’re away from home.

It could be the case you’re away full-time during the week. Therefore, a journey there and back each day may prove to be too much in terms of time. This could be so, especially given how busy the motorways can get during the working week. Therefore, you may prefer to stay closer to your contract site until the end of the working week. If you perform a week’s work in a location too far to travel back each day, you may look to stay over in some form of accommodation. As a result, you may even consider renting a house for a week if there’s one available.

Let’s now consider renting property on contract and if you can claim the cost of renting a house or flat near your contract site. You might consider paying rent and looking at rental property contracts while UK contracting. This could be especially so if you have a fixed work term of six months or more. Alternatively, if you’re contracting month to month and not guaranteed to be at the work location for a fixed period, staying in a hotel or B&B would be the better option than renting a house or flat on contract.

Where can you stay when you work away from home? 

UK contractors looking for accommodation and away-from-home rentals have several choices. Indeed, if you intend to rent far from home, various worksite accommodations are available. Therefore, for those who are looking to do this, they may consider the following:

  • Who near their workplace is renting a house to contractors?
  • Where offers rentals for contractors and contract workers accommodation?
  • Who may be renting rooms to contractors?
  • Where else in their contract location offers contractor rentals?
  • Are there any private houses/flats in the area they’re contracting? If there is, will anyone allow them a contract to rent a house or flat, perhaps on a short-term basis? 

Besides this guide on rent away from home and contractor rentals, we have a separate guide covering relocation costs. This covers the rules when you move to a new primary place of residence during your contracting career. Therefore, if you’re considering contracting abroad, there are certain things to consider.

When renting as a contractor, how can you claim for this? 

Travelling distances

When you’re away on business, the distance may be too far to travel there and back daily. Therefore, you can claim your working away-from-home accommodation costs. Besides hotel or B&B expenses, you may claim for rental of a property while working away. Therefore, when renting as a contractor, you can also claim the utility costs for your contractor’s house or flat. Furthermore, when you rent away from home, you can claim for the food costs, such as eating out or eating at the property where you’re staying.

When you rent as a contractor and claim for the house rental, utility bills and food, these are tax-deductible. As a result, when you’re charging your limited company rent, your business will save Corporation Tax on these costs. The claims will, however, be dependent on you meeting specific tests.

You may be able to claim your business clothing depending on your type of work. However, there are specific rules regarding what you can claim.

What are the choices for contractor rentals when you work away?

When you’re away for contract reasons, you may have family and friends who live nearby. If this is the case, you could stay with them. This assumes your family member or friend is happy to put you up for a few days.

However, the above may not be an option. In this case, you must investigate an alternative in terms of working away from home accommodation, such as:

  • A hotel.
  • B&B.
  • Specialist contractor property rentals -you can find firms that specialise in this area online.

With the last two above, you’ll be renting a house or flat on contract. Therefore, as a UK contractor limited company, you could consider renting away from home and staying at your contract site during the week. Let’s investigate renting as a contractor and what to consider when renting a house for business purposes. We can determine if your costs while staying away are allowable expenses when paying rent away from home while UK contracting.

What should you consider when you work away from home? 

The first areas to consider 

Certain factors should be considered regarding if you can claim your temporary accommodation as an expense:

  • First, when renting a house or flat as a UK contractor, the place you’re staying must not be your permanent place of residence. If a contractor lives in the house or flat, they can’t claim this i.e., it should be a temporary residence they only stay in while they’re at the worksite.
  • Secondly, when renting a house or flat on contract, you must continue to have your primary residence while claiming the temporary accommodation costs.
  • The place you stay in and pay rent for, which is close to your contract site, shouldn’t be close to your permanent residence.

If you meet the above criteria while staying in a house or flat, you can claim the cost of a contractor rental property near your new work site.

When you rent away from home, HM Revenue & Customs (HMRC) could challenge the claims. If they did this, you must show that staying in temporary digs near your contract site is more financially beneficial.

How do we compare the costs? 

Your company may, at some point, undergo an HMRC enquiry. As part of this, you must show the temporary accommodation expenses are necessary. You could, therefore, compare the rent away from home costs and utility bills against the mileage cost to get you to and from the worksite. In addition, if you drive to the temporary contract site, you can claim business mileage expenses under HMRC’s approved rates.

The available rates for business mileage expenses when using your own vehicle to get to your contract site are:

  • 45 pence per mile for the first 10,000 miles travelled in the tax year.
  • 25 pence for each mile after that.

On the other hand, you could compare the monthly property rent contract costs against the monthly rail costs to get you to the site. The house rental and utility expenses should be less than the mileage or rail costs. If it does, you must demonstrate it’s more financially beneficial.

It’s important to show there’s no personal benefit when you’re renting property on contract. By this, we mean no personal benefit is derived from staying in a temporary rental while you’re on contract. Therefore, if we ask how many days you can use a rental property for personal use, the answer is none. As a result, HMRC may ask you to demonstrate that you rent temporary accommodation purely for business reasons.

Furthermore, when you rent a flat or house for business, you cannot have friends or family stay there. If you did, any personal usage/benefit would require reporting on form P11D.

Renting as a contractor for business reasons 

What to consider for house rent contracts?

What should we consider concerning house rent contracts? Indeed, how does renting a house work for a contractor who is renting a house or flat on contract?

  • First, before you obtain a rent contract and enter a property, you should ensure it is fit for human habitation.
  • Second, ensure the landlord has paid for gas safety This is the landlord’s legal responsibility.
  • Third, you must get the written tenancy agreement for the property in your company’s name to claim the cost through your business. The type of tenancy agreement will set out the terms of the lease. An assured shorthold tenancy is the most common agreement if you rent from a private landlord or letting agent.

A written agreement

When renting as a contractor and staying in a house away from home for business reasons, the written agreement is a contract between the landlord and the tenant. This sets out the terms of the agreement, and, in this case, the tenant is your UK contracting company. When you receive the agreement for the contractor rental property, you should check your tenancy agreement and ensure the terms are correct. Therefore, the contract of rent agreement should contain the following:

  • Details of the parties involved.
  • The rental price.
  • Any deposit to be retained by the landlord.
  • The address of the property.
  • The start and end date of the tenancy.
  • The obligations of both the tenant and landlord.

Before signing an agreement, both parties must know what’s included in the tenancy. Usually, there’ll be a notice period of 30 days. However, you may be able to give notice at any time unless there is a break clause or the tenancy agreement says otherwise.

Therefore, if you’re renting a home and claiming the contractor property rent as an expense, the rental agreement must be with your limited company rather than you. Tenancy deposits are usually required upfront for lease agreements. Furthermore, deposits are repayable in full after the term of any agreements. Indeed, this assumes there is no damage to the property.

What are the other aspects of renting as a contractor? 

Renting as a contractor & the deposit protection scheme and your utility bills 

When you sign a contract to rent a house or flat, you may be required to pay a month or week’s rent in advance as part of a deposit for the house or flat. In the UK, a deposit protection scheme is now in place. Therefore, under this tenancy deposit scheme, the landlord must keep your deposit in a separate bank account when renting a property as a UK contractor. Additionally, under deposit protection schemes, the deposit is refundable to you in the future when you eventually leave the contractor rental property.

Regarding the associated utility costs, you should try to get the bills in your company’s name. Doing this will demonstrate the costs are for your company rather than you.

Indeed, it’s advisable your company (rather than you personally) pay:

  • Rent to the landlord.
  • Council tax to the local authority.
  • Energy bills to utility companies.
  • The cost of contents insurance.

Therefore, you could set up the rent and utility payments on your company’s bank account rather than your personal account.

If you can demonstrate and do all the above while working away, it’ll help back up your claim that these are legitimate business expenses via your company. HMRC explain in their guide on `expenses and benefits: accommodation’ what you can claim against tax.

How can you claim for food costs while renting a property? 

Suppose you can justify renting a house as a business expense. In that case, you can claim for the travel and transportation expenses related to the rental property in terms of travelling back and forth. In terms of food, you can claim your meals as subsistence expenses while you’re away. This is as long as these aren’t `excessive.’

When working away, there are HMRC standard meal allowances which are available. However, during your time away, you might usually eat at your temporary property; if you do, you can claim your shopping bills.

When claiming your shopping bills, you should ensure you don’t include personal items on your receipts from the local supermarket. Therefore, it’s important to be careful here; otherwise, you must separate personal items when claiming shopping bills through your company.

There is also a difference in how business meals and meals for entertainment are treated for tax purposes. In addition, all your travelling type costs are subject to you not falling foul of the two-year rule.

Furthermore, when you stay away from home overnight for business reasons, you can claim Personal Incidental Expenses (PIEs). These are allowable expenses when you stay away overnight. 

Final thoughts

Many limited company contractors in all industries stay away from home overnight during the week for business reasons. Many will opt for a hotel or B&B type accommodation; however, some will choose a contractor rental property.

Therefore, many contracting professionals who travel a fair distance will prefer to rent away from home in a temporary house or flat or stay in a hotel rather than commute to work. When you compare the cost of staying in a property overnight, the latter can cost much more.

Following the guidelines above, you can claim the temporary accommodation costs as travel expenses through your UK company. In turn, the cost of renting a house or flat on contract is a tax-deductible expense for your business. Therefore, when renting as a contractor, your company will save Corporation Tax (CT) at either 19% or 25% against its annual CT bill, depending on whether it is small or large (see our Corporation Tax guide for details).

Finally, when you can claim temporary accommodation costs through your contractor company, your business will pick up the cost. To sum up, it’s better than picking this up personally from your already taxed personal income.

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: April 6th, 2024 / Categories: Expenses, Most Read Articles /

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2 Comments

  1. Party Wall Specialists November 25, 2022 at 11:26 am - Reply
    • scottmoreton222222 November 25, 2022 at 12:52 pm - Reply

      Many thanks!

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