BED AND BREAKFAST BUSINESS

COSTS CLAIMS FOR A BED AND BREAKFAST BUSINESS

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I have a client who lives in a property but on the same grounds runs a bed and breakfast business-called outbuildings.

He has recently had solar panels installed on the  outbuildings only,  at significant cost. 

In my opinion these costs should be excluded from any revenue claims including AIA.  Instead I think the costs should be seen as improvements and so in an eventual sale would be added to costs in an eventual sale subject to CGT. Do others agree or disagree with me?  Thank you.

Also, I cannot see how interest on a lifetime mortgage at 5.5% per annum raised on the property can be deducted as a revenue cost.  Do others agree or disagree?  thank you. 

 

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By David Ex
29th Sep 2022 14:59

davidbarry wrote:

In my opinion these costs should be excluded from any revenue claims including AIA.  Instead I think the costs should be seen as improvements and so in an eventual sale would be added to costs in an eventual sale subject to CGT. Do others agree or disagree with me? 

Have you read the HMRC Capital Allowances Manual? That might provide some clarification.

davidbarry wrote:

Also, I cannot see how interest on a lifetime mortgage at 5.5% per annum raised on the property can be deducted as a revenue cost.  Do others agree or disagree? 

Suspect it depends on various further facts.

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Replying to David Ex:
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By davidbarry
30th Sep 2022 14:42

Further facts that I can see are the original mortgage application. What is in the mind of the taxpayer at the time the mortgage was taken out?
He might have written one thing on the application but used the funds for something else. The other problem is that it was a mortgage and not a loan for improvements.
I get the thing about CA manual. Fair play I will look now.

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Replying to David Ex:
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By davidbarry
30th Sep 2022 14:50

I think the answer can be found in CA45300 - Business Premises Renovation Allowance: Qualifying expenditure, qualifying building and qualifying business premises. 'the renovation of a qualifying building that is, or is to be, qualifying business premises.' Meaning of qualifying business premises

A building or part of a building is qualifying business premises if it is a qualifying building that is used, or available and suitable for letting for use, as acommercial building other than a dwelling. A commercial building is abuilding in use for the purposes of a trade, profession or vocation or as offices.

So, if let as a guest house on the property owners house then I cannot see that it allowable for tax. This is what I believe. Do you have a view? thanks.

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