I have a Ltd Co sole director/shareholder client who had planned to develop a yard and office at his private residence (rented).
An agreement was made between my client (as an individual) and his landlord (relative) confirming that he could sub let part of the land to his company to develop. A rental licence was put in place between my client and the company although no rent has been paid.
The company incurred initial groundwork costs of £10k (no VAT charged/claimed) to prepare the yard for several vans and there was some sort of issue with a neighbours boundary wall which is ongoing and has prevented any progress and is possibly going legal. It seems that my clients landlord (a relative) and the neighbour are dealing with this between them.
My client has decided not to prgress with the project and has found premises elsewhere.
My understanding is that the yard costs would have been capitalised if the project was completed but no capital allowances would have been available. Is it now a case of writing this off through the P & L and adding it back in the tax comp as abortive expenditure (ECC Quarries Ltd v Watkis)?
This was a genuine project that has gone wrong.
Is there a risk that HMRC may treat these costs as anything other than company expenditure?
My client has a directors loan account which could absorb this if neccessary.