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Are building costs of a workshop allowable for tax

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I'm unsure of my ground here so would appreciate any advise. My client runs a small haulage business as a sole trader and has two lorries. His parents also run a similar business but on a larger sacale and as a limited company. They own a yard where they keep their lorries and my client has been allowed to build a small workshop in this yard for servicing his lorries.Are the costs of building this workshop (approx £10k) deductible for tax purposes and can the VAT be reclaimed on them? I'm also wondering what the effect would be in capital gains terms if the parents ever decided to sell the yard. Any advise on this matter would be greatly appreciated

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By David Ex
05th Oct 2021 11:14

Surprised you can build a workshop big enough to accommodate large commercial vehicles for £10,000.

https://www.gov.uk/guidance/claiming-capital-allowances-for-structures-a...

And, of course, some of the spend may be on P&M.

Unless the parents and their company are also clients, I wouldn’t advise getting involved with their tax affairs.

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By Hugo Fair
05th Oct 2021 13:30

Agreed ... but is OP actually thinking that "costs of building this workshop (are) deductible for tax purposes and (with) the VAT reclaimed on them" by client - as opposed to by client's parents' company?

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By David Ex
05th Oct 2021 13:39

Hugo Fair wrote:

Agreed ... but is OP actually thinking that "costs of building this workshop (are) deductible for tax purposes and (with) the VAT reclaimed on them" by client - as opposed to by client's parents' company?

Yes, absolutely, it was just the comment at the end “what the effect would be in capital gains terms if the parents ever decided to sell the yard” which also, making a big leap, sounds like some confusion with PPR.

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By David Ex
05th Oct 2021 13:52

Duplicate

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By MD61
05th Oct 2021 14:17

Sorry for any confusion, I just wanted to know a) if VAT can be claimed by my client on the costs of building this workshop (materials, labour etc) and b) if the costs can be used to reduce his tax bill in any way. The reference to CG was relating to the parents but this can be ignored as the they aren't my clients. Thanks

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By Hugo Fair
05th Oct 2021 14:30

As I suspected, this is now getting more and more complicated.
Is your client acquiring rights to the land on which the construction will take place?
If not, is it some sort of temporary unit? And what rights of access will client have?

As David commented the cost seems very low ... but your client needs advice from someone who's an expert in property law, not just the tax aspects in abstract.

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By MD61
05th Oct 2021 14:52

It's a piece of land owned by his parents which has been in the family for many years. No rights to the land is required and access is as and when he wants - no restriction. The construction has already taken place and it's made of blocks on the lower section with metal cladding to the roofline and a metal roof. It's essentially an oversized garage where they can get the tractor unit in to carry out maintenance etc

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By Hugo Fair
05th Oct 2021 15:04

As I'm sure you've realised, I am not the expert in property law with whom I've suggested you need to speak.
But the fact that (hopefully) your client gets on well with his parents doesn't change the fact that he doesn't own (or have a lease for) the land on which construction has taken place ... which I suspect will be the start of several tax-related problems - including whether it belongs to parents or their company.
But I repeat ... you need to find an expert in these matters, outside of theoretical tax aspects, who can help bottom-out the legal situation which may affect tax.

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By MD61
05th Oct 2021 15:25

Many thanks for your input Hugo, much appreciated. It seems every bit as complicated as I'd feared and I will indeed take up your advice and consult an expert

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By David Ex
05th Oct 2021 16:40

MD61 wrote:

Many thanks for your input Hugo, much appreciated. It seems every bit as complicated as I'd feared and I will indeed take up your advice and consult an expert

Worth it to establish the legal position but bear in mind the tax/VAT on £10,000 isn’t huge so don’t have the client spending £10 to save £5.

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By MD61
05th Oct 2021 17:04

Yes, this is my concern David. Thanks for your input earlier

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