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Will HMRC allow me to put rent through as a business expense?
QUESTION:
I will be moving to the UK from another EU country to work on a 6 month contract, and I will be renting a flat very near my workplace for the duration. My umbrella company tells me that these circumstances allow me to claim the rent for the flat as a business expense.
On the one hand, the umbrella company seems quite reputable. Among other things, it is an AUCAE member, has been in business for almost a decade, and was recommended to me by my very reputable employer's very reputable staffing company.
On the other hand, I could not find any hard evidence that I would indeed be allowed to claim my rent as a business expense. In fact, during several hours of research into the topic, I came across records of a court case (HMRC v Tim Healy [2013] UKUT 337 (TCC), available online) where HMRC argued that an actor renting out a flat for 9 months for the duration of a stage production was not wholly and exclusively for business purposes, as there was a duality of purpose with his "ordinary needs for warmth and shelter". I am concerned that the same reasoning could be applied in my case, and some years into the future I would be required to pay back taxes due, plus interest and penalties.
As the potential penalties are quite high, I thought I should seek a second opinion on the matter. In your professional experience, would HMRC allow someone in my situation to claim rent for a flat as a business expense?
ANSWER:
I will be moving to the UK from another EU country to work on a 6 month contract, and I will be renting a flat very near my workplace for the duration. My umbrella company tells me that these circumstances allow me to claim the rent for the flat as a business expense.
On the one hand, the umbrella company seems quite reputable. Among other things, it is an AUCAE member, has been in business for almost a decade, and was recommended to me by my very reputable employer's very reputable staffing company.
On the other hand, I could not find any hard evidence that I would indeed be allowed to claim my rent as a business expense. In fact, during several hours of research into the topic, I came across records of a court case (HMRC v Tim Healy [2013] UKUT 337 (TCC), available online) where HMRC argued that an actor renting out a flat for 9 months for the duration of a stage production was not wholly and exclusively for business purposes, as there was a duality of purpose with his "ordinary needs for warmth and shelter". I am concerned that the same reasoning could be applied in my case, and some years into the future I would be required to pay back taxes due, plus interest and penalties.
As the potential penalties are quite high, I thought I should seek a second opinion on the matter. In your professional experience, would HMRC allow someone in my situation to claim rent for a flat as a business expense?
ANSWER:
It is generally accepted that a cost that has been incurred wholly and exclusively as a result of the work that’s being undertaken is allowable as an expense. However, you would also need to prove that the flat is not being rented purely because you are in need of shelter. If you left your home country and, after selling your house or flat, came to the UK the rental of the flat would be to give you shelter, as well as to give you a base from which to attend the contract, in which case the expense would not be allowed as there would be duality of purpose. If you are still maintaining a property in your home country then you will have incurred an additional cost by renting a property in the UK and you will have only incurred that cost because you have undertaken the contract. The Healey case was unusual inasmuch as HMRC would not have questioned the cost of the tax payer staying in a hotel for the duration of the placement and therefore one wonders why they would question the rental of a flat in the same circumstances. I would guess that the case was brought as the actor had spent a significant amount on subsistence and taxi fares (over £8,000), both which would have been questionable as expenses in the circumstances. Everyone has to eat to live and, as he was renting a flat, his costs for food would have been no higher that if he were at home one assumes. To successfully claim the taxi fares he would have had to prove that each receipts represented a journey to his place of work; I understand he was unable to do this.
So, to answer your question: if you maintain a property in your home country and you have been asked to fill a role in the UK as you have the specialist skills required for that role then the expense should, in my opinion, be allowable.
So, to answer your question: if you maintain a property in your home country and you have been asked to fill a role in the UK as you have the specialist skills required for that role then the expense should, in my opinion, be allowable.
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Lisa Keeble, ContractorUmbrella Ltd
Telephone: 01206 761 326 | info@contractorumbrella.com 12 St Peter's Court, St Peter's Street, Colchester, Essex, CO1 1WD |