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

Share This Guide, Choose Your Platform!

Introduction -renting as a contractor 

As a limited company contractor or consultant, you may be contracting away from home occasionally, or, on a regular basis. 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 for the whole working week. Therefore, you may plan on renting a house or flat on contract while you’re there. While renting a property on contract, this could be a choice of renting a flat or house near your current contract location. Depending on the length of your engagement, when renting as a contractor, you might rent away from home for a certain length of time. What’s more, when renting property on contract what else should you consider?

When you’re working away from home during the week and renting as a contractor, can you claim the rental accommodation costs and work away costs as business expenses? Basically, when conducting contract work away from home, you may make business trips from time to time. What’s more, some contract locations could be quite a distance from where you live. Alternatively, you may start working at a contract site that involves travelling a fair distance and staying there most of the working week.

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

Initial thoughts -renting as a contractor 

Common questions and considerations

Many independent contractors who work away (UK) from home will have common questions about what they can claim. Others who are perhaps considering far from home rental also have questions on what costs are genuine business expenses. Therefore, examples of such questions include:

  • Can I rent an apartment with a contract job?
  • Can I rent a house with a temporary job?
  • Can I rent a house through my company?
  • Can a limited company rent a house?
  • Can a limited company rent a residential property?
  • Can I deduct rent if I work away from home?
  • Are travel and transportation expenses related to rental property deductible?

As a result, UK contractors looking for accommodation and away from home rentals have several choices. Indeed, if you intend to rent far from home, there’s various types of worksite accommodations available. Therefore, for those that are looking to do this they may consider the following:

  • Who near their workplace is renting 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 that they’re contracting? If there are, will any allow them a contract for renting a house or flat for a period of time, perhaps on a short-term basis?

Besides contractor rentals when you rent away from home, we’ve a separate guide that covers relocation costs. This covers the rules when you move to a new primary place of residence during your contracting career. If you’re thinking about contracting abroad, there’s also certain things to consider.

Performing work away from home 

As a UK contractor, you may sometimes need 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 prove to be more practical to stay away overnight and find some working accommodation near your contract location. Therefore, you’ll need to be near your contract site in a hotel or stay away rentals while you’re away from home.

It could be the case that 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 that’s 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 look at rental property contracts while UK contracting. This could be especially so if you’ve a fixed term of work for, say, 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 as opposed to renting a house or flat on contract.

Renting as a contractor -claim for temporary accommodation 

Travelling distances

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

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

Based on the type of work that you do, you may also be able to claim your business clothing. However, there’s specific rules here on what you can claim.

Different choices of 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 that 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’ll need to 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 on the internet.

With the last two above you’ll be renting property on contract. Therefore, as a UK contractor limited company you could consider renting away from home and stay here while you’re at your contract site during the week. Therefore, let’s investigate renting as a contractor and what to think about regarding to renting a house for business purposes. We can find out when you’re renting away from home while UK contracting, if your costs while staying away are allowable expenses.

What to consider when you work away from home 

The first areas to look at 

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

  • First, when you’re renting a property as a UK contractor, the place where you’re staying in must not be your permanent place of residence. If a contractor lives in the property, they cannot claim this i.e., it should be a temporary residence that 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 whilst claiming the temporary accommodation costs.
  • The property that 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 renting property on contract, you can claim the cost of a contractor rental property near your new worksite.

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

Compare the costs 

Your company may, at some point, undergo an HMRC enquiry. As part of this, you’d need to try and show that the temporary accommodation expenses are necessary. You could, therefore, compare the renting 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 cost of monthly rail costs to get you to the site. The total property rental and utility expenses should come to less than the mileage or rail costs. If it does, you would need to demonstrate that this is more financially beneficial.

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

Furthermore, when renting the flat or house for business, you wouldn’t be able to have friends or family staying there. If you did, personal usage/benefit would require reporting on form P11D. 

Renting as a contractor for business reasons 

House rent contracts

What should we consider in respect of house rent contracts? Indeed, what should we think about in terms of how does renting a house work for a contractor who is renting a house or flat on contract?

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

The written agreement

When you’re renting as a contractor and stay 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:

  • 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.

Both parties must be fully aware of what’s included in the tenancy before signing an agreement. Usually, there’ll be a notice period of 30 days. However, you may be able to give notice at any time. That is 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 company, rather than with you personally. Tenancy deposits are usually required upfront for lease agreements. Furthermore, deposits are repayable in full after the term of any agreements. Indeed, this is assuming there are no damages to the property.

Other considerations when 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, there’s now in place a deposit protection scheme. Therefore, when renting a property as a UK contractor, under this tenancy deposit scheme the landlord must keep your deposit in a separate bank account. Additionally, under deposit protection schemes, the deposit will be refundable to you in the future when you eventually leave the contractor rental property.

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

It’s also advisable that your will company (rather than you personally) will 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 the rent and utility payments up on your company’s bank account rather than your personal account.

If you can demonstrate and do all the above, this’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.

Claim for travel and food costs while working away 

If you can justify a rental property as a business expense, you can also claim for the travel and transportation expenses related to the rental property in terms of travelling back and forth to this. 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.’

There are also HMRC standard meal allowances which are available. However, during your time away, you might usually eat at your rented property; if you do, you can claim your shopping bills.

As part of claiming your shopping bills, you should ensure that you don’t include personal items on your receipts from the local supermarket. Therefore, it’s important to be careful here; otherwise, you’ll need to separate out personal items when making claims for 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 also 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 for business reasons during the week. Basically, 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 either a temporary house or flat, or stay in a hotel, rather than commuting back and forth to work. When you compare the cost to staying in a property overnight, the latter can cost much more.

If you follow 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 will be tax-deductible expenses for your business. Therefore, when you’re renting as a contractor, your company will save Corporation Tax (CT) at 19% or 25% against its annual CT bill, depending on whether your company 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, this is 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: January 4th, 2024 / Categories: Expenses, Most Read Articles /

Share This Guide, Choose Your Platform!

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!

Leave A Comment