May 14, 2023
Can I Rent my Property to My Limited Company?
Are you the owner of a limited company as well as being a landlord? If so, you may well have wondered “Can I rent my property to my limited company?” The short answer is, yes, you can, but like most things related to running a business, there are rules and regulations to follow. In this post, we’ll look at what’s involved in limited company renting whilst providing some expert tips to ensure you remain compliant.
What is limited company renting?
Limited company renting is when a property owner rents out their property to a limited company so that the limited company effectively becomes the tenant. It usually occurs because the owner of the company intends to let employees live at the property.
Traditionally, the advantages of renting to a limited company meant that it was a safe form of income for landlords, because rentals were usually long term lets and were often a guaranteed form of income assuming that the business was credible. But the introduction of the Assured Tenancy Agreement (AST) in 1989 meant renting to limited companies has become more restrictive.
Can I rent my property to my limited company?
Yes, it is possible to rent a property to your limited company, but there are factors that you will need to consider.
When renting to a company, you cannot use AST as you would with a regular residential tenant. Instead, you will need a Common Law Letting Agreement or lease which allows an employee to live in the property while the company is the tenant and pays the rent.
As the landlord, you should ensure that the company does not allow a business to be run from the premises, as this then becomes a business tenancy.
If you’re renting to your limited company, the rental agreement must be a fair market value for the property, and the terms must be the same as if you’re renting to a third party.
It’s also important to document the transaction properly. This means having a written rental agreement in place which outlines the term of the rental, including the rental price, duration and any other relevant details.
What are the tax implications of limited company renting?
There are tax implications to consider when renting your property to your limited company. If you receive rent from your limited company, you will need to declare this on your personal tax return as rental income. You may also need to pay tax on the rental income.
On the flip side, your limited company can claim the rental payments as a business expense, which means it can reduce its taxable profit. However, it’s important to note that the rental agreement and the terms surrounding it must be of fair market value. If the rental payments are deemed to be excessive, HMRC may view them as disguised remuneration, which could result in additional tax liabilities for both you and your company.
What is the best way to rent out my property to my limited company?
Here are some helpful tips to ensure you stay compliant when renting your property to your limited company:
Take professional advice
Seek professional advice from an accountant or tax adviser who can help you understand the tax implications of the transaction, and ensure you follow the rules.
Document the transaction properly
Make sure you have a written rental agreement in place that outlines the terms of the rental. This should include the rental price, duration and other relevant details. Documentation will provide evidence of the fair market value of the property.
Charge fair market value
Be sure to charge a fair market value for the property. If rental payments are seen to be too high by HMRC, you and your company may face penalties or additional tax liabilities.
Keep accurate records of the rental payments and other related expenses. This will help you to stay on top of your tax obligations and provide evidence of the transaction if needed.
Consider using a guaranteed rent scheme
If you want to ensure you remain legally compliant when renting out your property to your limited company, a guaranteed rent scheme could prove advantageous. Apart from securing a monthly rental for a set period, a guaranteed rent scheme means everything is taken care of on your behalf, including getting the property ready to rent, everyday tenant liaison, repairs and maintenance, interim inspections and returning the property to its pre-let condition at the end of the agreement.