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.