Industrial unit / office
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    Default Industrial unit / office

    Hi everyone. First post and all that.

    I've been trading as a Ltd Co. for a few years now and want to build an industrial unit on some of my own land to work from. Not big, maybe 90m2. £15-20k plus vat.

    I've asked my accountant and he's going to get back to me but how is it treated from a tax point of view?

    I assume I can't just write off the £20k against corp tax in the first year. Does it get depreciated as a normal asset? Thing is, it won't really depreciate, if anything it might appreciate. I assume i can claim back all the vat?

    Cheers

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    Quote Originally Posted by Old Leslie View Post
    Hi everyone. First post and all that.

    I've been trading as a Ltd Co. for a few years now and want to build an industrial unit on some of my own land to work from. Not big, maybe 90m2. £15-20k plus vat.

    I've asked my accountant and he's going to get back to me but how is it treated from a tax point of view?

    I assume I can't just write off the £20k against corp tax in the first year. Does it get depreciated as a normal asset? Thing is, it won't really depreciate, if anything it might appreciate. I assume i can claim back all the vat?

    Cheers
    You can't claim if it's your own property as the BIK but you could sell the land to you company.

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    Quote Originally Posted by VillageContractor View Post
    You can't claim if it's your own property as the BIK but you could sell the land to you company.
    If you sold it to the company though you would have to pay business rates on any property built on it used for commercial purposes. Plus you would have a whole lot of bother with insurance.

    The most cost effective way of doing it is likely to build the structure yourself. Then get the company to rent it from you and pay for office furnishings.
    "You’re just a bad memory who doesn’t know when to go away" JR

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    Quote Originally Posted by SueEllen View Post
    If you sold it to the company though you would have to pay business rates on any property built on it used for commercial purposes. Plus you would have a whole lot of bother with insurance.

    The most cost effective way of doing it is likely to build the structure yourself. Then get the company to rent it from you and pay for office furnishings.
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    Quote Originally Posted by SueEllen View Post
    If you sold it to the company though you would have to pay business rates on any property built on it used for commercial purposes. Plus you would have a whole lot of bother with insurance.

    The most cost effective way of doing it is likely to build the structure yourself. Then get the company to rent it from you and pay for office furnishings.
    There are specific rules around fair rent as well, lest you divert cash from bank to your back pocket.
    But as you'll pay income tax on it anyway HMRC are less likely to be bothered.
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    Thanks, i did wonder about the renting idea.

    I was hoping to build it using company money and at least get the vat back. I would be building it on my own land - though i could sell some land to the company?

    Fair rent around here for a 90m2 unit is probably £1000/month. Hmmm, that might be a better idea actually if there's no tax benefits to actually building it through the company. Presumably the 312k/year rent would be considered an expense to the company?

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    Quote Originally Posted by Old Leslie View Post
    Thanks, i did wonder about the renting idea.

    I was hoping to build it using company money and at least get the vat back. I would be building it on my own land - though i could sell some land to the company?
    If you sell it to the company and work in anything you build then you are liable for business rates. This will make it harder to sell your house.

    You also will have to check the covenants covering your house and garden on whether you are allowed to have a business premises on your property.

    Finally your neighbours may have an issue with a business premises being in your garden.

    If you build it yourself and then rent it to your company, you avoid issues with neighbours - who tend to be the ones who report breach of covenants and you to the council - and business rates.
    "You’re just a bad memory who doesn’t know when to go away" JR

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    1. There's a risk that putting any kind of building on land that you own may give rise to a BIK, depending on how you interpret the rules on this (tip: HMRC will not interpret them in your favour). On one hand you could argue its a company asset provided to the employee mainly for business use and that any personal use is not significant (the same rule that lets us buy laptops and use them at home) but buildings are specifically excluded from this rule. You could argue that your land is also your company premises (which has different rules) - something I thought about when considering this - but I was never really convinced that it would wash with HMRC.

    2. BIK issue aside, having a commercial building on your land may make you partially liable for business rates depending on the rateable value of the building (it might be exempt).

    3. Potential CGT implications when you sell plus the complication of having a company owned asset on the land - it may put off potential buyers, you may need to move it or if the buyer is interested in it, you will need to either buy it off YourCo first to simplify the paperwork or the buyer will need to buy it from YourCo separately to the house.

    4. Building's are a capital asset but you cannot claim capital allowances on buildings. There is no corporation tax saving to be made. The main saving you could make is on VAT though if there's any personal use of the building you'd have to restrict this claim.

    5. Whilst some of these issues could be mitigated by selling some land to YourCo, do you really want to go down that rabbit hole just to save a few grand in VAT? What will you spend in legal fees by doing this? What impact will it have on your property value?

    If you're risk averse, buy it personally. Within reason, YourCo can fund most interior fixtures and fittings and furnishing it.

    If you're using the building to run a business, its worth checking with your council if they are happy with you building under permitted development rights (assuming the building is within the size limits). For clerical stuff with no visitors etc. they might be fine with it, some LAs might insist you apply for planning permission. My LA said it *might* be permitted development but wouldn't give me a concrete answer unless I paid to apply for a certificate of lawfulness for a proposed use, which I did, and was granted last week.
    Last edited by TheCyclingProgrammer; 18th September 2017 at 16:26.

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