A client has asked my advice and so have spent a while researching on the internet until I have gone goggle eyed so wondered if someone here would kindly confirm if what I think I know is correct:
A sole director of his limited company wants to rent a flat while he works away for 12 months . So, the rent, and the utility bills are an allowable expense as long as he doesn't rent the property for longer than 24 months. BUT I will have to report this (benefit) on his P11D which will incur a 13.8 % class 1 contribution charge. So for example his rent plus the utility bills for 12 months are £7000, so he will have to pay £966 in NI class 1 contributions. Is this correct?.....
From my my ATT text book (2008) - 'there will be no benefit in kind if the accommodation is necessary for his job (i.e. caretaker) or it is provided for the better performance of his duties (i.e. vicar or policeman).'
I expect none of these will apply to your client, so there will be a taxable benefit.
The NI is actually class 1A, so this is paid by the company, not the director.
The directors tax code for the following year will be amended to take into consideration the £7,000 benefit which he will therefore have to pay tax on at whatever rate he pays tax!
While he will pay £1400 less in corporation tax as the £7000 will be expensed so reducing his net profit , If he earns above the basic rate of tax (salary and dividends) then will the £7000 be taxed at 40%? So he will be worse off than if he stayed in a hotel during the week, is this correct?
