Charging for your own labour

Charging for your own labour

9:17 AM, 5th August 2013, About 12 years ago 21

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I have been renovating my buy to lets without making a charge for my time and effort. I told the accountant I want to start charging £10 an hour for my labour as this will give a more accurate figure as to the total costs of the properties and also limit the capital gains tax when I come to sell.  The accountant says I’ll need to set up a limited company, sort out payroll, national insurance and in short don’t do it. Sounds like using a sledgehammer to crack a walnut, any advice would be very gratefully received.

Andrew Jones Charging for your own labour


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r01

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13:55 PM, 11th August 2013, About 11 years ago

Reply to the comment left by "Jan Martin" at "10/08/2013 - 19:21":

Not sure why you can't charge...... I have a clause in my AST that the tenant will be charged at a specific hourly rate for all work the landlord has to do at the end of the contract to put items in the correct place, replace light bulbs, cleaning etc.,and I've never had a problem as my charge rate is well below a commercial rate.

I think the problem being highlighted at the outset of this blog was one of charging for one's own labour as far as the Tax Office is concerned in re-furbishing.

If you pay a builder, he has to pay tax on the profit he makes (and he will have to as you will require a receipt to offset against your income). If you pay yourself, you should be paying the tax and NI on your earnings (which incidentally could be higher than tax you will pay later on those same profits), but as you are not employed on a formal basis it cannot be established that you are not simply taking money out of the rental business and falsely claiming it is for labour.

However, the fact you are doing work on the property yourself instead of paying someone else enables the property to appreciate in value without cost, which is effectively profit and you simply pay tax on the profit at a later stage when you sell. If you are doing all the work and do not have an agreement with your partner that you will be paid for your efforts either from the rentals or from the profits before they are shared then you lose out - so have an agreement in the first place. It's your partner that has to pay you on his or her enhanced profits, not your fellow tax payers - SIMPLES....

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