A client wants to purchases a residential flat and use it as his office. The facts are
He wants to buy the flat using money that belongs to the Limited Company.
The flat will belong to the limited company and won't be rented out.
The flat he wants to purchase is in the same premises that he is owner/occupier of a larger flat.
He doesn't intend to use the flat for anything other than an office.
There will be no visitors to the office. He visits clients they don't visit him.
Crucially - he doesn't intend to notify the council of change of use from residential to commercial as he wouldn't get planning permission to run an office. He won't be notifying the leaseholder.
My thoughts are that because the premises is residential and will remain so it is not registered for business HMRC wouldn't allow the expenses, there is no proof that the flat is being operated as an office. Not suprisingly I can't find anything to support my views as normally you would go through the change of use for business premises. There are massive implications outside of accountancy such as insurance, fire regs, business rates, dishonesty, neighbours complaining etc which I've flagged up.
I've flagged up the issues with holding a residential property within a limited company.
Condensing it down - the client wants to buy a flat through his limited company and claim expenses as if the floor space was 100% business.
I have been asked by the client to restrict my advice to accounting for the expenses.
Could I have your thoughts on whether HMRC would allow the running expenses for the office to be claimed for Corporation Tax purposes?
Thanks for your time.