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Post Info TOPIC: A bit confused - rent vs studio costs
T P


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A bit confused - rent vs studio costs
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Hello.

I posted a while ago about studio costs in accounts, but am still a bit confused. I hope someone doesn't mind clarifying.

My b-i-law lives at home with his parents and pays £200 per month in "rent". He is self employed as an illustrator, and works in one of the rooms of the house as his studio. For tax purposes, his mum has written out a receipt in payment for studio costs of £200 per month, so he can put his rent (studio costs) through his business as an expense. Effectively paying no rent, he is classifying all rental payments through his business as a studio cost.

Is this legal? Sounds a bit sketchy to me from HMRC's point of view, but does anyone know if this is allowed or not?

Thanks,

Tom.

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kjmcculloch


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I would suggest that if it's not true then it's not legal. Plus, I'm sure this will have an impact on CGT if his parents decide to sell their house.

Kris

-- Edited by kjmcculloch on Sunday 22nd of November 2009 06:40:26 PM

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Kris McCulloch 
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T P


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Well it's true, but I think it's nevertheless worth a phonecall to HMRC to find out, in addition to the capital gains too...

Thanks Kris.

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kjmcculloch


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Just another wee quick point Tom. Bear in mind the MLR.

Kris

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Kris McCulloch 
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Amy8n


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If the studio is rented for business use then the building will need to have the correct permissions for business use. In this situation, I would assume the building to be for residential use only. In addition, he would need to pay business rates as well as rent.

I can see what your client is trying to do but I would have thought it best he just claimed an allowance on his tax return for working from home.



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T P


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Ah I see, thanks very much guys I'll forward on the message and he can get on the case.

Thanks again.

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