Do You Work From Home? If So, Charge Your Company Rent!

Today, more and more people work from home. In addition to offering employees a better work-life balance, business owners can cut costs as they need fewer resources. Moreover, this new model opens up the talent pool, allowing employers to bypass geographic barriers. 

But, if you work or run your company from your home, there are additional savings you can make. These, however, depend on your circumstances. At Newnham & Son, we believe in helping our clients cut costs wherever possible. Here’s everything you need to know about charging your company rent when your main office is also your home. 

Instances in Which You Can Charge Your Company to Work From Home

There are two instances in which you can charge your company to work from home. The first one is if you are running your own company fully from your place of residence. The second is if you perform a substantial number of your duties as an employee or director working from your house. 

Charging Your Company

If you fit within one of the two examples listed above, you have different options to choose from when it comes to charging the company you own or work for. Your first option is to recharge the company on the same basis as an employee would. This would include charging the company for a proportion of your bills and other expenses. 

Formalising a Licence Agreement

When working from home in the UK, you also have the option to create a licence agreement with the company. This will allow the company to occupy a section of your property, using it for commercial purposes. With this option, the company will pay your rent, expenses, and service charges. You can then claim all of your expenses in your tax return. 

If you do charge a company rent, you are running a commercial property letting business. You can, therefore, claim variable costs and other relevant overheads. Remember, to fill in the land and property section of your self-assessment if you need to declare profits from your rental agreement. 

What Does the Agreement Entail?

If you work from home or rent office space to a company, you can create a non-exclusive licence agreement. This agreement should be set on an arm’s length basis. It should also clearly state that the director acts as the company landlord and charges the rent agreed upon between both parties. 

Furthermore, the agreement should make it clear that the director can offset some of his or her expenses against the rental income. As a result of this agreement, the director or landlord essentially falls into the position of a sole trader. 

Work With a Local Accountant to Plan Your Rental Agreement

There are various considerations you must make if you work from home. As you can see, this option can help save you money. You may also be able to increase your revenue. However, there are additional steps you need to take to set up a rental agreement that is agreeable for both parties. Moreover, you need to make sure that the rental terms are clear and fair. 

At N&S, we work with everyone from sole traders to large corporations. Many of our clients work from home meaning we know everything there is to know about putting rent against your taxes. We can also help you create a licence agreement in order for you to charge your company rent. To find out more about our services, contact us today. One of our friendly team members will be happy to help answer any questions you may have.