Tax treatment of converting director's garage to an office

Suppose ABC Ltd (not the real name) pays to have a garage at a domestic property (which is jointly owned by Mr and Mrs Smith) converted to habitable space which will then be used exclusively by the company for business purposes as a home office. Mr Smith is the sole shareholder and director of the company.

The company will not pay rent to Mr and Mrs Smith and will not claim any of the household expenses against its profits. 

 

How does the payment for the conversion by the company affect the subsequent CGT due on the sale of the house and is there a charge to income tax on the cost of the conversion on Mr and Mrs Smith?  Might there be a benefit-in-kind charge?

 

How is the payment treated in the accounts of ABC Ltd? Could it qualify for relief under the annual investment allowance? 

 

Or is it all too complicated and should Mr Smith just pay for the conversion out of his dividend income from ABC Ltd.

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I would set up a licence to occupy ...

Steve Holloway |
Steve Holloway's picture

Steve 

alanp |