My new employer is a limited company which has just sold a residential property it had been letting. Over the years it has capitalised improvement expenditure on this property, not all of which I am happy would be allowable for CGT if that was the tax the company was paying and some of it is difficult to identify the exact nature of the expenditure anyway. My question is - is this expenditure on fixtures, fittings, etc completely disallowed or is it allowed as trading expenditure or by some other means..It is 30 years since I qualified and working in industry I have never come across this issue before. It is important because this is the first disposal of several the company plans to make as it changes it's business focus towards an area I am more familiar with. Not that I expected to be asked to do the full accounts and tax comps on my own anyway.
I should say that some expenditure has been charged to repairs and renewals over the years so somebody must have thought this expenditure was capital in nature, but there are many small invoices which had I been there at the time I might well have considered writing off. One example I came across for example was for a wooden garden shed..and the sort of thing I am concerned about are cosmetic improvements that I would not have thought an integral part of the building as such.
Also my predecessor moved the properties from Non current assets to inventories in the last accounts but made a claim (s161 tcga 1992) on the tax return submitted so that a chargeable gain did not arise on the transfer to inventory. Does this oblige me to treat the disposals as a chargeable gain or given its a property development company can I call these trading profits.
This job has not been as simple as I was led to believe
Any help would be greatly appreciated.