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Hi

A client has an enquiry and the area of business/private use split has reared its ugly head, especially with earlier year adjustments.

Any pointers as to how the revenue will assess and to a defence as the clients have not got the money to pay!

The clients insist that the private accommodation above is necessary for security purposes and they would not choose to live there etc etc.

Thank you

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By DMGbus
20th Apr 2011 21:22

Private use adjustment is usual

In my (36 years) experience a private use adjustment is usually made for sole proprietors or partners living "on site" - this goes for Pubs, Shops/Newsagents, Farms and Guesthouses as examples.

I've not come across any precedent for NOT making the add back.   The only tax break that I'm aware of here is if the manager is an employee, then no add back is made in the employer's tax computations BUT there would be a BIK arising if the manager was a director (discriminatory taxation rules at work here).

The add back typically is applied to:-

Water RatesPremises InsuranceHeating & LightingPremises repairsMortgage Interest

NO add back for Business Rates, full add back for Council Tax re: living accomodation.

In the case of guesthouses there are informal locally agreed "scale charge" figures in some seaside areas which are a simplification measure in substitution of more detailed calculations.

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