Building work on house through limited company?
Discussion
My dad has a limited company, and is looking to fit an office/conservatory on the side of his house.
As it will be an office for his business, I think he can put the fix+fittings through the company?
What he's wondering is whether he can put the actual building work too?
His accountant friend mentioned that he may have to pay some sort of tax when/if he comes to sell the property?
Any one done anything similar, or knows the ins and outs?
Cheers
As it will be an office for his business, I think he can put the fix+fittings through the company?
What he's wondering is whether he can put the actual building work too?
His accountant friend mentioned that he may have to pay some sort of tax when/if he comes to sell the property?
Any one done anything similar, or knows the ins and outs?
Cheers
If he uses company funds to pay for the construction of the extension/conservatory, he is, in effect, clearly stating that this is a business asset and therefore not part of his main residence.
If and when the house is sold, that part of the house which was a business asset and not part of the main residence is therefore not included in the Capital Gains Exemption applicable to a person's Principal Private Residence. Therefore, a Capital Gain might arise on the apportioned element of the sale price relevant to the conservatory/office.
As the conservatory is a company owned aset (after all, the company paid for it), the gain will be a company Capital Gain and therefore will be taxed under Corporation Tax rates rather than personal tax rates (CT 21% at the moment compared to IT of 20%/40%). More importantly, companies are not entitled to offset the personal Capital Gains Allowance (currently £9,600) when computing a gain.
In any case, construction costs of a building confer no tax relief to a business so what would be gained by using company funds to pay for the construction?
Would he not be better off to
a) put the cost of relevant plant and machinery additions (i.e. office equipment, desks, computers, chairs etc) through the business
b) pay personally for the actual construction costs but make sure that the company shows in its accounts an annual charge covering "use of home as office" or something similar
If and when the house is sold, that part of the house which was a business asset and not part of the main residence is therefore not included in the Capital Gains Exemption applicable to a person's Principal Private Residence. Therefore, a Capital Gain might arise on the apportioned element of the sale price relevant to the conservatory/office.
As the conservatory is a company owned aset (after all, the company paid for it), the gain will be a company Capital Gain and therefore will be taxed under Corporation Tax rates rather than personal tax rates (CT 21% at the moment compared to IT of 20%/40%). More importantly, companies are not entitled to offset the personal Capital Gains Allowance (currently £9,600) when computing a gain.
In any case, construction costs of a building confer no tax relief to a business so what would be gained by using company funds to pay for the construction?
Would he not be better off to
a) put the cost of relevant plant and machinery additions (i.e. office equipment, desks, computers, chairs etc) through the business
b) pay personally for the actual construction costs but make sure that the company shows in its accounts an annual charge covering "use of home as office" or something similar
taffyracer said:
As an aside to this, what can the individual claim against the company for a home office?
Like any expense - you can claim the actual cost...http://www.taxationweb.co.uk/tax-articles/business...
However if you are a one man company who is never really actually in your "office" as you are always at a client site then be wary of claiming at all
http://www.ir35calc.co.uk/contractor_expenses_use_...
Owain said:
Cheer for that eric, will show him this in a min
Not sure what he meant really - just mentioned it when I was back yesterday
Probably a good idea just to put some of the fixtures through the company
He needs a good chat with his accountant before he starts writing out company cheques for what are, essentially, domestic costs. Many traps, pitfalls and expensive accidents can befall one who does not get good advice in this area.Not sure what he meant really - just mentioned it when I was back yesterday
Probably a good idea just to put some of the fixtures through the company
Eric Mc said:
He needs a good chat with his accountant before he starts writing out company cheques for what are, essentially, domestic costs. Many traps, pitfalls and expensive accidents can befall one who does not get good advice in this area.
It might also flag up the issue of planning permission, no?Gassing Station | Business | Top of Page | What's New | My Stuff