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Construction co Works to directors homes

Building works done to the home of directors of a construction company

I have just started working for a small construction company. I have never worked in this sector before and am getting to grips with the accounting / tax rules. The company has 3 directors and is in the process of building a new house for one of the directors and doing extension / renovation works on the home of another director. All costs of build work to date have been expensed to the p&l account and input vat where charged has been reclaimed. No entries have been made for the revenue side. My question is about the correct treatment, particularly tax treatment of both of these transactions. Should the market value of the new build be credited to sales and debited to the DLA! And if the director does not physically pay for the house how is the DLA cleared.or should the costs of the build be debited to the DLA rather than the p&l and the DLA then be cleared by way of dividends proposed.  Is there a BIK ? As the sale of a new build house is zero rated i.e. A taxable supply, is it ok that the input at on costs has been reclaimed ? In respect of the extension, again what is the correct accounting / tax treatment and should the input vat have been reclaimed if the director I said not paying the market value of the building works done ? 

 

Thansk in advance for any advice. 

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10th Nov 2017 22:57

You don’t seem to be sufficiently aware of the nature of the transactions being undertaken. You need to ask the principals what their intentions are, and then the accounting and tax treatments will probably fall into place around the real world events as they unfold.

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11th Nov 2017 00:56

Quote:

I have just started working for a small construction company. I have never worked in this sector before and am getting to grips with the accounting / tax rules.

Maybe they wanted someone who didn't know too much about the business so they could carry on their nefarious activities. It's all falling into place now.

If I was you, I would resign and submit a Suspicious Activity Report to the National Crime Agency.

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11th Nov 2017 12:09

You need to ask what is happening. If you believe the answers are honest you can act accordingly. Clearly, if you believe the answers to be dishonest and you feel pressured to do something that is equally dishonest your response should be very different.

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12th Nov 2017 19:37

From what you say, there is almost certainly more than one reason why input vat should not have been claimed.

That, unfortunately, could be one of many problems. Is there a reason why the company is building a house for the director and doing work on the other director's house?

Please say that the company hasn't been set up for this sole purpose.

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