# Renting a room in my own house for business



## bamboozle

Hi,
New user, i am in the process of setting up a company, initially as a sole trader and hopefully in time as a ltd company.
i own a house with my brother and was wonder if anyone can advise if i could rent the spare room in our house (as an office) then use this rent as a company expense? (as in pay my brother rent of the room)
i'm hoping to be able to allocate a proportion of gas, phone, internet bills towards company but would be interested in allocating the rent of the room.
any suggestions?


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## Lobby

*Re: Rentin a room in my own house for business*

Yes, you can, however then your brother (assuming he is the one receiving the rent)  will have to declare this as income and may be liable for tax on it. The "rent-a-room" scheme only applies to residential accommodation, not to a business within a property. 

If this is not correct, then please let me know as I could to exactly the same. The €7650 rent a room scheme would be a nice little scheme if it could be applied to a home business.


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## ClubMan

*Re: Rentin a room in my own house for business*



Lobby said:


> The €7650 rent a room scheme would be a nice little scheme if it could be applied to a home business.


I would be surprised if this was actually the case.

Note that using/renting your home (in part or full) for business use (especially where the business writes off some of the cost as deductible expenese) will most likely have tax (e.g. _SD,_ _CGT_ and/or rental income tax) implications. In addition there may be other implications (e.g. privately managed estates may have rules about this, planning permission may be required, insurance and/or mortgage implications etc.).

If I was you I would get independent, professional advice on this proposal.


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## Graham_07

*Re: Rentin a room in my own house for business*

Extract from Revenue website : - 
Where a room (or rooms) in a person’s sole or main residence is (are) let as residential accommodation, gross annual rental income of up to €7,620 is exempt from tax. Relief in respect of mortgage interest relief is not affected. The relevant Capital Gains Tax/Stamp Duty provisions are also not affected. For more information see *Leaflet IT 70.*
This clearly precludes getting the relief from a business tenant. It would mean your brother would be liable to tax/prsi at his marginal rate on the net rent, and, as Clubman said, there may be other issues on SD/CGT etc. so professional advice definitely warranted.


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## Lobby

As far as I know where the business use is only as a "home office" then there is no effect on Stamp duty, CGT etc. Your insurance company may require you to list any high value items you have though and certainly tell them that there is a "home office" but theres usually no change in the premium - ours wasn't affected.

However, if the usage involves the public visiting your premises (e.g. a doctors surgery) then this would have implications for the items listed above, particularly insurance.


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## ClubMan

Lobby said:


> As far as I know where the business use is only as a "home office" then there is no effect on Stamp duty, CGT etc.


Yes - but renting out to a third party for use as an office is surely a different ballgame?


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## Pegasus

You may leave yourself open to rates being charged. Generally, I wouldn't charge rent but claim a reasonable proportion of house expenses. You'll get a deduction for corporation tax worth 12.5% for rent but you and your brother will be liable at 20 or 41% and you open up cgt possibiblities.


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## deem

The rent a room scheme is def out as per posts above, in addition you should take care as if you rent your PPR and your brothers PPR when it comes to sell it, then a proportion of your gain will be liable to CGT.  as the proportion of your home used as an office and rented will not form part of your PPR.  It could affect your stamp duty exemption too if you availed of it.


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## FillSpectre

I am currently using a room in my house as a office and using an umbrella company. I have een told to charge my *mortgage* as an office rent/expense at a proportional rate i.e. 3 bed house and using one as an office means 1/3 of the mortgage can be deducted as an expense. Same then goes for the bills. 
I have been assured this is correct by my accountant and another IT contractor.
Now I am about to set-up a limited company and think the same is right?

o.p.
From what you are saying I think you could right off 1/6 of the total mortgage and 1/3 of fuel costs,plus phone, broadband etc...


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## ClubMan

Did your accountant explain all of the tax implications of this move - e.g. _CGT_ and possibly _SD _implications? Not sure if owner occupier mortgage interest relief might also be affected.


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## FillSpectre

ClubMan said:


> Did your accountant explain all of the tax implications of this move - e.g. _CGT_ and possibly _SD _implications? Not sure if owner occupier mortgage interest relief might also be affected.



He says it is fine one of the recruitment websites says the same as does another accountant. I am acting in good faith. Simply I bought this house with an additional room for an office so it makes sense a portion of the mortgage is an expense. THe other tax issues shouldn't a be a concern. I pay the accountant to know these things so Isn't he liable not me?


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## ClubMan

FillSpectre said:


> I am acting in good faith.


If discrepancies in your tax affairs arised and you attempt to use this as an excuse Revenue will not accept it.


> I pay the accountant to know these things so Isn't he liable not me?


Get him to put his advice in writing.


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## FillSpectre

ClubMan said:


> If discrepancies in your tax affairs arised and you attempt to use this as an excuse Revenue will not accept it.


Actually it does cover you for lots of liability. Are you an accountant? 


ClubMan said:


> Get him to put his advice in writing.


It is and not just from this guy as I stated. I am not sure what makes you an expert care to enlighten me?


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## ClubMan

FillSpectre said:


> Are you an accountant?


No - but I know that this is the case. Ignorance (no matter if it was in good faith) of the law is not an excuse that _Revenue _will accept.


> It is and not just from this guy as I stated. I am not sure what makes you an expert care to enlighten me?


 Sorry - it's also from some website or other so it must be true. My bad.


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## FillSpectre

ClubMan said:


> No - but I know that this is the case. Ignorance (no matter if it was in good faith) of the law is not an excuse that _Revenue _will accept.


Actually you are wrong when it comes to penalties from my experience. Maybe you have been fined by the revenue but I haven't.


ClubMan said:


> Sorry - it's also from some website or other so it must be true. My bad.




Your bad is the fact you are so sure you are right over more than one proffesional accountant.

I personally doubt you know more than them and have yet to give any reason how you do know more.

No need to reply

OP 
The link above states how it can be done maybe you might want to ring the revenue to clarify to put your own mind at risk as you will get certain people tell you different regardless of whether they know or not.


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## ubiquitous

Hook Head Software are a recruitment agency, not an accountancy or tax firm.  As such they should never be relied upon as a definitive source for accountancy or tax advice as they would not be legally liable to anyone for the consequences for bad advice on topics outside their core expertise. 





> Hook Head is an IT Jobs site specifically designed for IT Professionals looking for work in Ireland. Hook Head's approach is holistic in nature in that we believe in order to attract top quality IT Job Candidates we need to offer something of value in return to those candidates, and to get the best quality IT Jobs Listings we need to have a highly-skilled captive audience. Our goal is to satisfy both of these desires by means of our IT Community.



Btw, I could not find any indication either on google or on their site that Mark Burke is a "professional accountant". Can you enlighten us?


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## FillSpectre

ubiquitous said:


> Btw, I could not find any indication either on google or on their site that Mark Burke is a "professional accountant". Can you enlighten us?



Good for you as I have stated more than one accountant I have spoke to has said it is ok. I also suggest clarifying with the revenue. 

The link was just to show somebody else saying it.

Recruitment agencies deal all the time with contractors in IT services and know the benifits. The fact they aren't accountants would not mean much to me but OP check with the revenue if you are worried.


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## ClubMan

FillSpectre said:


> Actually you are wrong when it comes to penalties from my experience.


I never mentioned penalties.


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## room305

This thread had me intrigued for some reason so I just rang my brother about it (he's an accountant). He said that the charges and proportions FillSpectre mentions seem very reasonable and it is something many accountants encourage because it allows the claiming of expenses that would not otherwise be deductable. However, this needs to be balanced by the CGT implications. If you are claiming that x% of your abode (even if only for a certain duration) is a business then it follows that this proportion is not eligible for PPR relief on CGT.

Likewise with TRS but the personal element is likely to be greater than the relief threshold in which case there might be no effect. He wasn't sure on the SD implications. His feeling was that for a sole trader there wouldn't be an issue but that it could be for a company (separate legal entity) but he's going to make some enquiries with someone more expert in the area. It would almost certainly be liable for clawback (if this was applicable) as this applies in any case where rent is received that is not under the rent-a-room scheme.

Finally, in the OP's case he queried the logic of paying rent assessable at the marginal rate to avail of tax relief for a company at 12.5% (he didn't think he'd have much joy claiming it as rent-a-room).


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## asdfg

See also Here specifically Ch 5, 5 Pg 15 Partial Relief 



> *Partial Relief*​​Full exemption may not be due if only part of the house has been used as the individual’s residence, in which case an apportionment is made to arrive at the exempt portion of the total gain. This may happen where the house is used partly for business purposes or where rooms in the house have been let​
> ​​​


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## ClubMan

So - the previous two posts would contradict FS's earlier post claiming that this rental situation was "fine" and that additional tax implications (for owner occupier mortgage interest relief, _SD _clawback and/or _CGT_) should not be an issue?


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## FillSpectre

ClubMan said:


> So - the previous two posts would contradict FS's earlier post claiming that this rental situation was "fine" and that additional tax implications (for owner occupier mortgage interest relief, _SD _clawback and/or _CGT_) should not be an issue?


I rang the tax office and spoke further to my accountant. The tax office said if the business use section does  rely on the rest of the building it is exempt. So if the toilet is in the residence it still remains part of the house and exempt from CRT. THe tax office also said the  CRt division would have to be made aware. 
In theory you can claim anything once they don't audit you so realistically once it all looks resonable it shouldn't ever cause problems. I personally won't take any risks but if people think this is a risk then I am taking a risk. It will always be down to personal judgment as there are ambiguious parts in legislation. Not the use of  "may not"
"Partial Relief
 Full exemption *may not* be due if only part of the house has been used as the individual’s residence, in
which case an apportionment is made to arrive at the exempt portion of the total gain. This may
happen where the house is used partly for business purposes or where rooms in the house have been
let."
If it actually said just "may" it would be certain.
I am going to get it in writing  from the tax office what was said to me. It's up to anybody else to do the same or not.


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## ubiquitous

FillSpectre said:


> I am going to get it in writing  from the tax office what was said to me.



Did they give you any guidance on the income tax implications for the householder on rent received from the company? This is imho a far more immediate and serious issue than the possibility of an eventual CGT hit on disposal of the property.


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## room305

ubiquitous said:


> Did they give you any guidance on the income tax implications for the householder on rent received from the company? This is imho a far more immediate and serious issue than the possibility of an eventual CGT hit on disposal of the property.



My brother said he is absolutely certain rental income received from a business is assessable at the marginal rate. Even if the rent-a-room scheme does not make specific mention (and I think it does) of it being limited to non-commerical use, it would definitely be against the 'spirit' of the act.

He really didn't fancy anyone's chances of getting away with it so if anyone is actually considering trying it I would write to the revenue for an advance judgement.


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## ubiquitous

room305 said:


> My brother said he is absolutely certain rental income received from a business is assessable at the marginal rate.



I would agree with this opinion. This is why I don't really understand how FillSpectre thinks this is some sort of tax-saving plan. I don't see any tax benefit whatsoever except perhaps in very limited cases where a company director earns so little that they are tax exempt - in which case they would probably be subject to automatic Revenue Audit for that reason.


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## FillSpectre

ubiquitous said:


> Did they give you any guidance on the income tax implications for the householder on rent received from the company? This is imho a far more immediate and serious issue than the possibility of an eventual CGT hit on disposal of the property.


It isn't RENT it is an expense. Nobody is charging rent your putting down the expense of having a room used by a business. No income is being recieved therefore no tax. A cost incured is being claimed on. 
I urge anybody who wants to do it to satisfy themselves but as with most tax things it depends on the question you ask.
CGT may possibly be an issue ( I have been told it isn't) but are you going to claim the expense for the entire time of the mortgage ? CGT department would also have to go looking and decide so if they catch you  it will be 20% on a portion of the property market value as opposed to 41% now on the cost. I would take that as not a bad move.


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## ubiquitous

FillSpectre said:


> It isn't RENT it is an expense. Nobody is charging rent your putting down the expense of having a room used by a business. No income is being recieved therefore no tax. A cost incured is being claimed on.



This doesn't make sense. An expense is only an expense if it is paid to someone. In this case the expense is being claimed by a company in respect of use of a room owned by an individual. It is obvious that this is Rent - what else could it be.


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## ubiquitous

FillSpectre said:


> CGT department would also have to go looking and decide so if they catch you  it will be 20% on a portion of the property market value as opposed to 41% now on the cost. I would take that as not a bad move.



What about interest and penalties?

Btw, companies pay tax at 12.5%, not 41%


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## FillSpectre

ubiquitous said:


> This doesn't make sense. An expense is only an expense if it is paid to someone. In this case the expense is being claimed by a company in respect of use of a room owned by an individual. It is obvious that this is Rent - what else could it be.


It isn't rent, for it to cost something does not mean it has to be rent.


ubiquitous said:


> What about interest and penalties?
> 
> Btw, companies pay tax at 12.5%, not 41%


To avoid double taxation you pay 41% as I discovered. If you have a letter from the tax office staing it is ok I doubt there will be penalties. AS i have said it is up to the individual and what they feel comfortable.

The real question is why are you so bothered? I am telling you what the tax office and an accountant have told me what are you basing yourheated view on? You hounded me on another thread over this so what is your problem?


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## ubiquitous

FillSpectre said:


> ...your heated view...





FillSpectre said:


> You hounded me on another thread over this so what is your problem?



Don't worry. I'm not hounding you. Neither am I getting "heated" about this. I just believe that your opinion on this subject is incorrect (even if based on information from Revenue and/or an accountant). As such, if left unchallenged, it is also potentially misleading to others. That is why I have chosen to debate the issues in further detail with you. You should note that my scepticism is shared by other contributors to this discussion.

I think we might well agree to disagree on this subject...


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## FillSpectre

ubiquitous said:


> I think we might well agree to disagree on this subject...



I don't agree to that on the on a really simple grounds. 

1) You just claim it is wrong without any foundation or explanation 
2) You are telling everybody you are right  but not saying to check themselves
3) You decided to ask questions of me on another thread after accusing me of things I never claimed.

I have not claimed to be correct just informed people on what I have  been told by accountants and the tax office. I also suggest you check on your own individual basis to be sure. 
We can disagree on the belief of what you can and cannot on this matter  but on the fact you are talking in a superior manner and shouting people down we won't . You are simply rude, arrogant and a tendency to try to bully people. Not very usefull in a discussion group. 

I won't take your advise as you have never given any reason that you know what you are talking about.


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## room305

FillSpectre said:


> I have not claimed to be correct just informed people on what I have  been told by accountants and the tax office. I also suggest you check on your own individual basis to be sure.



Have the Revenue actually put it in writing to you that it is okay for a private company to pay a portion of your mortgage with no income tax considerations for you as an individual?

Btw, I don't ubiquitous is being rude, I just think a lot of people are a little incredulous at this setup and are wondering whether we do not understand it correctly or are somehow misinterpreting your comments.


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## FillSpectre

room305 said:


> Btw, I don't ubiquitous is being rude,



http://www.askaboutmoney.com/showthread.php?t=51601

See what he posted, that is rude. 

Don't beleive what I have been told and what I have explained. It is simply an expense is what I have been told. I have checked it to my satisfaction and awaiting a letter from the tax office. Do what you want but at least stae how you know different if you insist I am wrong. Either way you should ask the the taxman yourself if you want to do it. If you aren't doing it why care?


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## room305

FillSpectre said:


> Don't beleive what I have been told and what I have explained. It is simply an expense is what I have been told. I have checked it to my satisfaction and awaiting a letter from the tax office. Do what you want but at least stae how you know different if you insist I am wrong. Either way you should ask the the taxman yourself if you want to do it. If you aren't doing it why care?



Why do you constantly question the motivations and credentials of people who claim disbelief of your setup? My curiousity has been piqued. My brother works as a tax advisor and several of my acquaintances work in or around this field. When I mention your treatment of your tax affairs they all exclaim complete disbelief that the revenue has sanctioned it. Unless you are paying income tax on the rental income received from your company, in which case they cannot understand why you are doing it this way.

It may be that your comments are being misconstrued but the whole setup doesn't sound very practical. You cannot legitimately claim something as an expense without it actually being an expense. Otherwise every company could reduce its taxable profit to zero very easily. An expense necessitates a payment to another entity. In this case your ltd company is claiming a rental expense. However, this means you as an individual must be in receipt of rent which is assessable as income at the marginal rate. Which begs the question, why go to this effort to reduce the 12.5% corporation tax your company would pay? Unless you have very limited income, would this treatment not simply serve to increase your tax liability?


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## FillSpectre

room305 said:


> Why do you constantly question the motivations and credentials of people who claim disbelief of your setup? My curiousity has been piqued. My brother works as a tax advisor and several of my acquaintances work in or around this field. When I mention your treatment of your tax affairs they all exclaim complete disbelief that the revenue has sanctioned it. Unless you are paying income tax on the rental income received from your company, in which case they cannot understand why you are doing it this way.


Lets be 100% clear here I have not querstions anybody's credentials as nobody has stated them!
Note the way you have phrased it to your brother is a big part of the issue.  I beleive it is an expense as I have without being rent and have been told so. 
I am satisfied that I am doing the correct thing  in what I am doing and it is not rent. If you are not don't do it I would suggest anybody that may be able to do it to check it out.


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## room305

FillSpectre said:


> I beleive it is an expense as I have without being rent and have been told so.
> I am satisfied that I am doing the correct thing  in what I am doing and it is not rent. If you are not don't do it I would suggest anybody that may be able to do it to check it out.



Of course it is an expense - the limited company pays a portion of your mortgage ergo it is an expense for the company. The puzzling thing is how on the other side of the balance sheet it is not income for you, the owner of the property.

Still, as long as you are happy with your setup I guess.


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## Ms X

Hi,

My other half is my tenent under rent relief scheme and I am first time buyer (bought 1 yr ago). He has recently set up a website and has been working from home for the past few months. He has now register the company as a limited company and he used our address as the company's registered address. 

The rent was as it was when he moved in intially - i.e. no extra rent charges for using the place for the business

Is this going to cause me stamp duty issues or problems with my mortgage provider? 

Your help is very much appreciated as a little worried now!


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## Purple

room305 said:


> Of course it is an expense - the limited company pays a portion of your mortgage ergo it is an expense for the company. The puzzling thing is how on the other side of the balance sheet it is not income for you, the owner of the property.



I'm not an accountant but that's the bit I don't understand either. An expense is a good or service that a company buys. In this case it is buying it from the homeowner. Why is that not income? 
For example, a business is renting space from an individual who owned an office. That individual had a mortgage on said office. If FillSpectre's scheme is correct then the guy who owns the office in my example doesn't pay income tax on the rent.... because it's an expense!!??

Am I missing something 

For the record I have never seen any post by ubiquitous that is anything but constructive and courteous (unlike other posters like, er, me! )


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## room305

Ms X said:


> My other half is my tenent under rent relief scheme and I am first time buyer (bought 1 yr ago). He has recently set up a website and has been working from home for the past few months. He has now register the company as a limited company and he used our address as the company's registered address.


 
Always seek independent advice of course but I don't think an issue can arise unless he maintains that the rent he is paying is a business expense for the limited company. In which case, it falls outside the remit of the rar scheme. Otherwise, the money he is paying and the purpose for which it is being paid has not changed (i.e. rent from him as an individual for the purpose of accommodation).


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## Guest112

Fill..... You're wrong mate.


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## ang1170

Agreed. If it walks like a duck, quacks like a duck.....

He mightn't want to call it rent, but that's what it is, and as such it's income and subject to tax at the marginal rate.

It's quite different from taking on a share of ESB or Eircom bills, where the company is simply paying the expense direct to a provider. Come to think of it, that's taxed too (indirectly through the provider's corporation tax).

Maybe what the Revenue mean is there's no problem with the company paying the expense, and claiming it as such, but I'd definitely want it in writing if you think they're telling you that you can avoid treating it as (personal) income for the property owner.


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## room305

FillSpectre's setup must be wrong and I think he knows this, hence his defensiveness. I just hope he genuinely has taken professional advice and has it in writing to aid his defence. You cannot have your cake and eat it. If nothing else, it would make the rent-a-room scheme redundant. Why bother renting under the threshold when you can set up a private company, lease the room to the company (which may even be in the business of sub-letting) and enjoy income tax free rental with no threshold.

Funnily enough my brother informs me he is just after dealing with a relatively similar query where someone was planning on running a business from their PPR. They were wondering about TRS and when he looked into it he judged that it wouldn't be allowed because it would need to be apportioned. He suggested reviewing s.244 of the Taxes Consolidation Act. He also stressed that to claim it as a business expense you will need to inform your lender as it will probably violate the terms of your loan agreement if you don't. You would need to pay rates as well.


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## gonk

ubiquitous said:


> I would agree with this opinion. This is why I don't really understand how FillSpectre thinks this is some sort of tax-saving plan. I don't see any tax benefit whatsoever except perhaps in very limited cases where a company director earns so little that they are tax exempt - in which case they would probably be subject to automatic Revenue Audit for that reason.


 
It might be, if the OP has other rental properties which are generating a nett loss after interest and other allowable expenses. These losses could be offset against the rental income from the home office, leaving it tax exempt.


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## ubiquitous

Again this would make sense in the short-term but (unless he is expecting never, ever to make rental profits) hardly in the long-run. This would amount to getting a 12.5% corporation tax break for the company by sacrificing a loss forward that should eventually generate a 20%/41% income tax break for himself.


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## Purple

APHRODITE said:


> Fill..... You're wrong mate.


LOL 
That about sums it up


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