Running a hotel - Goods taken for private use

Running a hotel - Goods taken for private use

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Hello, I have a client operating a hotel; a husband and wife team who run the hotel through a limited company. The husband works away during the week and returns home some evenings and weekends. They do not separate groceries, etc. for their own use from those purchased for the hotel (includes food, toiletries, alcohol, etc.). Are there any standard ways to apportion the goods taken for private use for the purpose of the statutory accounts and the CT return? Any suggestions would be gratefully received. Thank you.

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By johngroganjga
08th Apr 2014 11:10

I don't often quote case law, but I imagine Sharkey v Wernher applies so goods have to be taken out at market value.  That of course creates taxable a profit in the business if the goods were bought at wholesale prices, as I imagine they were.

That doesn't help with the estimate of what goods were taken of course - just with the valuation of them.

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Replying to Tim Vane:
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By jack2013
08th Apr 2014 11:22

Thanks, yes agreed the goods would have to come out at market value. My thoughts are to use an average cost for groceries and then apply that per person, with an adjustment for the husband not being there 100% of the time. The question must then be - what is an average grocery spend (including alcohol)? I guess those figures must be available somewhere...

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By johngroganjga
08th Apr 2014 11:32

You will also have to check whether they do any personal food shopping at all, and take that into account.

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By Richard Willis
08th Apr 2014 11:55

Just a thought

If the proprietors' contracts were changed such that the hotel provided their domestic needs (I assume that they live in?), then it would become a BIK and (presumably) at cost? 

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Replying to Accountant A:
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By jack2013
08th Apr 2014 12:04

Mmmm that's a thought. They live on site, in a small lodge in the grounds. However, bizarrely they are buying a lot of the food for the hotel from Tesco rather than wholesalers! So, in this case the costs are pretty much as they would be for a domestic household.

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By Steve Kesby
08th Apr 2014 12:01

Err...

... since it's run through a limited company, then ITTOIA 2005, s. 172B (which is derived from Sharkey v Wernher) isn't in point.

There is a benefit in kind, which will be calculated at marginal cost, to the extent that you can't argue that it falls within the ITEPA 2003, s. 317 exemption. See EIM21671.

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