I have recently picked up a new client and have discovered that he has incurred £12k in renovating a property through his limited company business (the business is a plumbing business). The property has then been sold twelve months later. The property was purchased in the client's name rather than through the limited company.
Unless I am missing something, the £12k needs to be charged to the director's loan account and therefore disallowed in the corporation tax computation. The £12k is then treated as enhancement expenditure and added to the base cost for CGT.
What is nagging at me is that the client has now set up a limited company with a view to purchasing more property to renovate and sell, although none have been purchased yet. I am conscious that the first purchase and sale are now tainted by his future actions and the income treatment should possibly apply to the first sale.