H and W clients have an outbuilding used for two businesses - an office for a Ltd Co and a shop which is W's sole trade.
Ltd Co pays rent for the office to H and W which is declared on their tax returns.
The shop does not pay rent but this year the Ltd Co is loss making and the shop is profit making. If rent is claimed as an allowable expense in the accounts of the sole trade (and W's tax return) then is there a corresponding pick up for rental income on H and W's tax return?
If not then is there not a tax deduction with no pick up?
Replies (8)
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"If rent is claimed as an allowable expense in the accounts of the sole trade (and W's tax return) then is there a corresponding pick up for rental income on H and W's tax return?" You state that the Wife's shop does not pay rent, which makes some sense because the wife is a 50% owner of the property. The Wife cannot pay rent to herself so any element of payment in that respect is irrelevant but she can pay rent to her husband. That would be deductible in the business accounts but would be taxable as property income in his hands.
I think you misinterpreted Paul's comment. I believe he meant that you could include rent as a cost in the sole trade accounts to the extent that it was reported in H's tax return as income, ie income and expense balanced out. Your way would mean £2k cost but only £1k income, which would be incorrect
I assume the expenses you mention are actually paid out by H & W. In which case, i would treat H and W the same, and so the wife reports income from herself (50%), and the expenses. In her return, the rent expense contras to the rental income. No imbalance then. Or if you prefer, ignore half the rent, and just have H report his half