Tuesday, 1 October 2013
Hefty bills could hit hard
“Owning your company’s trading premises can be tax efficient, but there are also drawbacks too,” said Stuart Haynes, from the commercial team at Martin-Kaye Solicitors in Telford and Wolverhampton.
“When you gain a financial advantage from the arrangement, even if this is the side-effect of a genuine business transaction, you will be hit with a tax bill under the ‘benefits in kind’ rules. This can happen in particular if you allow your company to use your property rent-free, and it spends money improving it.”
With a growing number of companies working from home-based premises, Stuart said this was becoming an increasingly important issue to consider.
He said: “There are solutions. For example, if you intend to create a home workspace by perhaps converting a loft into an office, you could grant your company a lease over this, so that it can pay for the work.
“You won’t then be taxed on this benefit in kind immediately – only when the lease expires. Bear in mind, though, that this only works with a lease. A rental agreement will not do.
“And drafting a lease agreement is a job for a lawyer, so make sure you get expert advice.”