Rent from the company

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Rent from the company
  • Proprietor retains business premises used in company's trade
  • Company owns business premises used in its trade
  • Extracting property from a company
  • Ideas - proprietor has insufficient cash to purchase property
  • Working from home
  • Interaction with buy to let losses

The proprietor may choose to retain the business premises and extract profits by way of rental income from the company. The taxation of property income is covered in the Property income guidance note.

He may either retain the property personally on incorporation of a new company or transfer the property out of an existing company at a later date. A key consideration may be the company's liability to Stamp Duty Land Tax (SDLT), which will be based on the market value of the property. For guidance on SDLT see the Stamp duty land tax guidance note.

Another scenario to which much of this guidance applies is on the sale of a company, where the owner-manager chooses to retain the business premises and grant a lease to the purchaser. For more information on this see the Retaining assets to provide income guidance note.

There are many considerations other than taxation, ie commercial and legal, as to whether the individual proprietor or the company should retain ownership of business premises. Planning relating to property transactions should be carried out under specific terms of engagement, supervised by an experienced tax adviser.

In overview, the main considerations in some common scenarios are highlighted below. Further details can be found in the Personal or company ownership guidance note.

Proprietor retains business premises used in company's trade

There are several factors when considering whether a business owner retains a property to rent to their company:

  • increase in value may be subject to capital gains tax at 28% (10% if the transfer qualifies for entrepreneur's relief as an 'associated disposal')
  • receipt of rent from company may impact on the availability of entrepreneur’s relief

More on Extraction of profit: