Should the business pay us rent?

Your suggestion has good and bad points to consider. On the plus side, the rent payments are tax deductible for the company, so it will serve to reduce the company’s tax liability. The rent is taxable in the hands of your wife and you, but shouldn’t attract National Insurance.

However, you are likely to forego some of your Entrepreneur’s Relief on the sale of the property. Entrepreneur’s Relief reduces the rate of Capital Gains Tax payable from 28% to just 10% on gains arising on the sale of business assets- provided certain criteria are met.

You must also consider whether there will be any VAT implications of charging a rent.

You would be advised to seek professional advice before charging the company rent, as the long-term implications on your capital gains tax position could be significant. Your local TaxAssist Accountant would be happy to discuss this with you further.

Date published 2 Mar 2014

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.