You’ll normally be able to rent accommodation and claim the cost as a business expense if you’re working away – within reason. Travelling for work can be exciting but exhausting, so it’s understandable if renting an apartment nearby is more appealing than travelling hundreds of miles every day.

In this article we’ll go over rental expenses in more detail, and explain what’s considered an allowable expense if you want to rent an apartment for work.

What is a business expense?

Running your own business comes with inevitable costs which need paying to keep things in working order. Thankfully, many of these costs are classed as ‘allowable expenses’ which means you can deduct them from your business income, and then pay tax on the profits left over.

If you work from home you may also be able to claim some of your household costs against your tax bill, and if you travel to different clients’ workplaces, you may also be able to claim travel costs.

Can I claim travel expenses going back and forth to my client’s site?

For contractors and self-employed individuals who move around a lot – this can be complicated. First off, yes you can claim for travel expenses but only if they’re not commuting costs. So, things like travelling to client meetings and training events are all fine, but travelling to your own office is your ordinary commute so you can’t claim it.

What if I spend a lot of time travelling to a specific client or place?

The line is obviously blurred when you spend a significant amount of time at one client’s location. The good news is that HMRC allow contractors to claim travel expenses from their home to a client’s site or premises if it’s a ‘temporary workplace’, which is where the 24-month rule comes in. A workplace is considered temporary if:

• You spend less than 40% of their time there
• Or if you expect to be based there for 24 months or less

If you’re travelling a long way and need to make the trip often then you might find it easier to book a local hotel. This can usually be claimed as an allowable expense, but if you’re working away for months at a time you may want to consider longer-term accommodation to keep your costs down – which we discuss next.
 

Would renting an apartment be classed as a legitimate business expense?

It depends on your circumstances. For your apartment rental to be classed as an allowable expense you’ll normally need to:

• Keep your permanent residence, and have no plans to relocate on a permanent basis
• Demonstrate that it’s financially beneficial. For example, if an annual train ticket is more expensive than the annual cost of rent, it proves it’s the better financial option. The same applies if you compare rent versus the cost of mileage.
• Ensure it’s strictly for business. If you have friends and family staying at the property this becomes a Benefit in Kind, so you’ll pay tax on the value of the benefit you receive. If you have a limited company you need to ensure the rental agreement is in your limited company’s name, and the rent itself is paid through your business bank account.

It’s all decided on a case-by-case basis, but this outlines what HMRC deems acceptable.

How do I report this on my tax return?

You’ll record this expense exactly as you would any other allowable business expense. For example, if you’re a sole trader, it’ll go on your Self Assessment, and if you’re a limited company director it’ll go on your Company Tax Return. This is also the same for contractors who operate as a limited company!

Is this the same if my employee needs to rent an apartment for work?

Yes! Whether you or another employee need to rent accommodation, the same procedure applies. The rental agreement must be in your company name, and the rent itself should come out of your business bank account.

They won’t be able to have friends or family visit them at the accommodation whilst they’re away though, otherwise the cost is considered a Benefit in Kind.

Are there any restrictions to the type of property I can rent?

Yes, the apartment which you’re renting for business reasons must be deemed by HMRC as reasonable. Ideally it should be to the same standard, or less, as your permanent residence. So, any penthouse suites that overlook the London Eye are likely to get a big no-no from HMRC.

 
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