Building work associated with leasehold premises
My clients have incorporated their business and shortly after, purchased the freehold which they had previosuly rented. The property comprises two shops and a dwelling, on one site. It has been purchased privately by the directors and one shop is rented to the company.
Some improvements are being made - a new shop is being constructed to replace that currently being let to the company and when it is finished the original building will be knocked down. This will improve the layout of the site so that the shop and the dwelling will each have their own driveway.
Having started the accounts I was dismayed to see that the client has been putting the redevelopment costs through the business. Although they can recover the VAT if the company is invoiced, it appears to me that there would be no tax relief on the work at any point unless the owners of the freehold bear the costs in which case they would get tax relief when the property is sold. It also seems to me that the value of the dwelling will be improved by the work done, in which case not all the improvements could be considered relevant to the company anyway.
I feel that the redevelopment costs should be borne by the freehold owners and the directors current account should be adjusted accordingly for costs paid so far. The VAT claimed to date should be repaid.
I would be grateful for anyone's thoughts on this as working in isolation you have to argue every case with yourself!
- which software to use? 155 2
- Giving a seminar 210 13
- Website - Should I upgrade? 99 2
- jury service 197 6
- What is the best blog for practitioners to follow? 138 4
- Debiting private use proportion to directors loan account 200 7
- Checking a contract 87 3
- Pattern for CTA 55 1
- VAT on garage rent 228 12
- Company Fuel - Reimbursement to avoid Benefit in Kind 139 5
- Related Parties Note 968 12
- Tasks for new trainees 289 7
- Discretionary trust reporting 137 3
- 10 year debentures and CT 88 3
- General legal fees 61 1
- Capital gain or not? 247 4
- Are HMRC getting it right? 502 11
- Law Shipping/Odeon related question 168 3
- Foreign Tax 56 1
- Capital Gains on Inherited Property 350 13
- Desperately seeking Susan, Sam or anyone with any other name 1,111
- Experience with Islamic investor following Sharia-compliant rules? 583
- Darwinpay Partnership Assessment 387
- S464A Charge to tax: conferring benefit & BIK 293
- Interest on Loan to a Company 195
- Bank interest in 'near' facility recall situation 178
- Agent fees to sell business 170
- Alphabet shares 166
- ACCA continuity of practice arrangement needed 159
- Residency 91 day rule 148