You may have heard of salary sacrifice arrangements, but you must be careful if you want your limited company to pay your mortgage ...
In a limited company, one benefit option that is often overlooked is the ability to subsidise an employee's mortgage payments or to even loan a deposit for a property. But do remember a benefit in kind would arise.
So, if a mortgage payment, or another kind of personal expense, is made on behalf of an employee, it is treated as though they have received taxable income.
In normal circumstances, an employee would have to pay both income tax and NIC before getting their net salary, and then make their mortgage payment. In this scenario, they only pay income tax on the amount of the mortgage payment and the limited company pays the NIC, but can also claim corporate tax relief on it.
This also applies to company loans. A company may subsidise a deposit via an interest-free loan and for loans under £10,000, no benefit in kind arises. However, remember that larger loans to directors must be fully repaid within 9-months of the company's year-end or HMRC will charge tax at 32.5% on any outstanding amount.
Remember that the appropriate documents must be drawn up for the loan, detailing the terms of the loan, how it will be repaid and by when!
It is also possible for a company to claim a tax-free relocation allowance of up to £8,000 on certain expenses; any more than that and the relief can be deducted from the total amount and tax would only be paid on the excess. It has to be noted that the employee's existing residence must be an unreasonable daily commute for HMRC to allow relocation expenses.
Care must be taken when agreeing to pay these expenses and you must ensure the arrangements are HMRC compliant. Each situation is different so I strongly recommend you get proper tax advice before making a final decision.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.