Art Gallery - Splitting a property between business and personal use

Art Gallery - Splitting a property between...

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A client of mine has just opened an art gallery from her home on the high street in our town.

She bought the property 2 years ago and has been renovating it; the front 2 rooms of the house which open up to the street will be an art gallery and rear rooms and upstairs will be used as her home. She is operating on a self employed basis at the moment; basic rate tax payer.

I am trying to get my head round the best way to advise bearing in mind income tax and capital gains tax considerations.

Should she define the house as for example 70% private 30% business and account for repairs and costs of running the property on a 70/30 basisbut then when they sell the property 30% of the gain might be assessable to CGT.

Or are there clever ways in which things might be set up to help minimise potential tax liabilities especially CGT. I sense there might be opportunities for tax planning but can't quite get my head round the best options.

For example with CGT rates being lower than IT rates as much of the cost of renovation as possible should be offset against income tax (rather than added to base cost for CGT) would seem to make sense; this is likely to create a loss for a couple of years but of course losses can be carried forward.

Any thoughts and ideas would be really helpful

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By geroge
23rd Dec 2014 18:45

This is mostly a matter of fact as to what areas are used for business. Decide that and then take it from there.

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