A client has a company that sells garden offices and rooms that can attach onto existing properties and be used as additional rooms, which can have bathrooms etc put in.
They have recently bought two of these rooms and placed them in local garden centres as an advertisement tool and sit there throughout the year with contact details if anyone is interested in buying one.
I just wondered what peoples thoughts were on the tax treatment and acocunting treatment of this? My inital thought was that this is essentially advertising but on a more grand scale, although the cost should be irrelevant, and therefore the whole cost would be allowable for tax purposes. I believe the intention is for them to be kept there long term so as such i do not believe there would be much resale value, so i dont beleive they should be included in stock, and even if they were the net realiable value would be alot less than the cost.
I didn't know if anyone had something similar, my thought were this would go along the same lines as if someone had a kicthen and bathroom shop and have the displays out.
Thank in advance
Replies (5)
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Start with the proper accounting treatment, and go from there. Will the expenditure have only a short-term benefit to the business?
Have a look at HMRC's Capital Allowances manual, pages CA22020 and CA22030. There's some helpful guidance there on what structures might be plant.
You really have to ask how long term is long term, if outside in the elements how long will one really be an advertisement for itself, as the sun and rain "attack" the timber etc it will degrade and may not show the product in a good light.
Years ago I had a client who sold sheds, he like your client sat in it and took enquiries/orders, but he did sell it every so often (I think about every year) as a used one and replace it with a new one (though for life of me I cannot recall how I treated such sheds- this was late 1980s!!!!)
I should have mentioned- in the motor trade do demonstrator vehicles leave stock before their sale, in my experience they just carry at lower cost/nrv and get sold as a demo with a discount.
So, my gut feel is if in tip top condition and changed often it is just stock if long term held and used it is setting of business-I really struggle with the advertising argument.
[quote=Beak07
I just wondered what peoples thoughts were on the tax treatment and acocunting treatment of this?
[/quote]
When dealing with the acocunting treatment, ensure to apply the correct discocunt.