My client is director and controlling shareholder of the company which rents its business premises from him personally. The latest accounts for the company reveal that it spent over £80,000 building an extension to the property.
As far as the company is concerned, the most obvious classification for the expense would seem to be tenant's improvements, written off over the term of the lease. But what of the enhancement to the director's property? This would, on the face of it, appear to be a BIK, but whilst the company occupies the premises for its trade, the director cannot convert it into cash, which seems to preclude the BIK charge.
Has anyone come across such a situation, or knows of any relevant case law?