Tax treatment of a "studio" constructed in the garden

Tax treatment of a "studio" constructed in the...

Didn't find your answer?

Client has spent £12,000 constructing a "studio" in the garden which she uses to meet her psychotherapy clients.  My gut reaction wants to say that no allowances are available for the construction but am I missing something here - particularly in relation to capital allowances. Any help gratefully received.

Replies (14)

Please login or register to join the discussion.

avatar
By Paul Soper
12th Dec 2011 22:48

P&M allowances

There may be some expenditure which qualifies as P&M - heating etc, and if you are lucky might even be energy efficient and qualify for a 100% allowance (see eca.gov.uk for details) otherwise probably integral assets and so no more than a 10% WDA (8% from April) but it should still qualify, unless there is substantial capital expenditure on other assets, for the Annual Investment Allownce.

Remember P&M is P&M when it is purchased NOT when it is installed into the structure.

Thanks (0)
avatar
By thisistibi
13th Dec 2011 09:33

P&M

It seems like most of the costs will be on the building itself, which will not qualify for P&M or as revenue.

Will the studio be used exclusively for business purposes?  In which case, while I agree that capital allowances could be claimed on intergral features (lighting, wiring, etc) and on plant & machinery, and a claim could also be made for the running costs, I wonder if exclusive use might give CGT issues in terms of PPR relief.

 

Thanks (0)
Replying to Cat's whiskers:
Red Leader
By Red Leader
13th Dec 2011 11:26

just a thought ....

... is the studio moveable? Is it like a glorified wooden shed, or a permanent brick building? There *may* be some wriggle room if the former, though others on here are more expert than me on CA's.

Thanks (0)
Replying to rustyred1:
avatar
By thisistibi
13th Dec 2011 12:18

No

Red Leader wrote:

... is the studio moveable? Is it like a glorified wooden shed, or a permanent brick building? There *may* be some wriggle room if the former, though others on here are more expert than me on CA's.

There won't be any wiggle room, since it must not just be moveable but must actually be moved, or at least necessary to move it, in the course of the trade.  

Thanks (1)
avatar
By ringi
19th Dec 2011 12:32

Capital gains tax when the home is sold?

What you win now, may be lost on capital gains tax when the home is sold…

Thanks (0)
By The Minion
19th Dec 2011 12:35

Just looking at the reasons for the building ie Pyschotherapy clients.

Is there any mileage in arguing that it is for personal security ITTOIA 2005 s 81- dont want them in the house knowing the layout etc etc??

Presumably there are personal attack alarms etc (or am i watching the wrong films)?

Thanks (0)
By George Attazder
19th Dec 2011 14:55

Thank you so much...

... I've just spewed coffee all over my computer! :)

[themetune=psycho]

I think you may have a somewhat jaded view of psychotherapy clients.  You do seem to not be distinguishing them from axe-murderers.

Most people undergoing psychotherapy do so in respect of emotional issues (such as depression or bereavement) or things like eating disorders or OCD and the like.  It's only on very rare occassions that they creep into the therapist's house in the dead of night to viciously murder the entire family, including the goldfish.

[/themetune]

However, if a self-employed jailor (I think these sort of things are being increasingly outsourced) builds a prison in his back garden, because it wouldn't be safe for him and his family (let alone the neighbours) having the inmates wandering round the house.  Then, he wouldn't be entitled to relief under S.81 for the costs of constructing the prison, because they are capital in nature, and S.81 only grants relief for expenditure that would otherwise be denied relief on W+E grounds.

There may be an element of the build that qualifies for capital allowances though, as others have said.

Thanks (1)
By The Minion
19th Dec 2011 14:54

so

i am watching the wrong films... :)

 

On the bereavement front maybe (with the addition of a table, dodgy hairdo and Pat Butcher earrings) it could be classed as a communications centre... EIM36731 might help, although there is possibly a proof issue similar to that in place with the old mobile car phone rules:

 

"..the duties require that the employee should be in contact, or be able to be in contact with others on a continual basis, for business purposes.."

Thanks (0)
avatar
By c.baker2
19th Dec 2011 17:12

Tax positions

The cost of equipment to carry on the trade is allowed for capital allowance purposes.

The yearly running costs are also allowed ie heating decoration replacement repairs.

As for the risk of capital gains tax this is surely unlikely. If the building cost £12,000 would its construction offer a profit if sold in say 10 years time. Unlikely and if there was a profit would it exceed the annual exemption limit of plus £10,000. I do not think so.

Thanks (0)
Replying to Alex_T:
avatar
By ringi
20th Dec 2011 12:57

But would the building stop PPR relief on the part of the garden it covers it is now being used exclusively for business usage.  

Thanks (0)
Replying to mabzden:
avatar
By thisistibi
20th Dec 2011 13:12

Yes

ringi wrote:

But would the building stop PPR relief on the part of the garden it covers it is now being used exclusively for business usage.  

I'm glad someone stated the obvious

Thanks (0)
avatar
By MarionMorrison
20th Dec 2011 09:27

@ David

Wasn't Dressed to Kill you're thinking of?  Michael Caine didn't seem to have a problem with having his consulting room being in an integral basement.  But then if it encourages Nancy Allen to arrive and start stripping, who cares about the tax deductibility?

Thanks (0)
By The Minion
20th Dec 2011 14:28

@MM and @GA

I am definitley watching the wrong films, i thought that was the one with Angie Dickinson in it, must have missed Nancy Allen.

 

Of course if stripping is involved then there would be a valid claim for additional heating costs (one wouldn't normally keep at shed - sorry office, at stripping temperature).

 

Also @George i suppose the one kind of client you would want in the house would be the one with OCD, it would be spotless!

Thanks (0)
avatar
By MarionMorrison
20th Dec 2011 15:18

Poor Angie

Angie never makes it past the lift and Nancy Allen is the prostitute who sees/finds the body in what I still think of as one of my favourite scenes in cinema.  As seen on Youtube (cert. 18) if you search on Dressed to Kill Lift Scene.

Thanks (0)