Improvements to Leasehold Property - Directors House

Improvements to Leasehold Property - Directors...

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I have a scenario that I need some help with.

Last year a director of a limited company who worked from home decided he wanted to extend his home and build an office, he claimed the VAT back as expenditure incurred by the company for the company (office is separate from all living space, only shared item is access via the front door)...fine ok, in principle, VAT reclaim ok.

Issue...can't occupy under a license as major company expenditure (25k) which would trigger BiK so occupies under a lease...ok fine...so we have a capital gains position on the director...again, no problem, house value has not increased by very much since purchase, capital gains exemption to apply, some CGT to pay.

Question...if/when the director sells his home we have a balance sheet entry of 'Improvements to leasehold property' can the director be required to repay the company for the improvements out of the sale of the home and would this a) be subject to VAT and b) deductible when calculating the capital gain?

Would appreciate help (I'm the bookkeeper trying to sort out the records for year end and accountant doesn't seem to want to answer the question!)

Thank you in advance....

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By chicken farmer
08th May 2014 15:28

Make the accountant earn his corn!

In your position I would throw the ball back at the accountant. There is a potential here for a Revenue enquiry.

 

However just in case that fails, what are the terms of the lease and why do you think that there has been no benefit in kind because of it?

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