Limited Company - Allowable expenses

jp213

Hi

A client of mine recently formed a limited company and work from home. He was asking if he could claim the cost of the work carried out 2 or 3 years ago for the room he uses as an office. Work carried out was security (CCTV & Alarm) , underfloor heating, new windows and insulation. Now due to the nature of his business security is necessary because the stocks are valuable. The room is also used domestically.

The question is, can he claim these costs? In my opinion, the CCTV & Alarm he can probably claim it but the rest he can't.

Can anyone share their opinion?

jp123

kelsmick

Hi JP,

I personally wouldn't put any of them through due to period between them being installed and the use of the room as an office unless they were purposefully installed with the intention of them being used as an office but as you say the room is also used domestically so it could be argued for that reason, if it was less than a year then I would claim a proporation. Is the alarm and CCTV connected to the rest of the house or just primarily that room? If i was going to claim then I would just proportion the cost to that room and claim that amount only.

The new windows, underfloor heating & insulation is more of a home improvement rather than being a cost to the business, my understanding is that improvements to premises are not an allowable expense anyway.

jp213

kelsmick said:

Hi JP,

I personally wouldn't put any of them through due to period between them being installed and the use of the room as an office unless they were purposefully installed with the intention of them being used as an office but as you say the room is also used domestically so it could be argued for that reason, if it was less than a year then I would claim a proporation. Is the alarm and CCTV connected to the rest of the house or just primarily that room? If i was going to claim then I would just proportion the cost to that room and claim that amount only.

The new windows, underfloor heating & insulation is more of a home improvement rather than being a cost to the business, my understanding is that improvements to premises are not an allowable expense anyway.

Thanks Kelsmick!

The CCTV & Alarm is for that room only as he has also another security system for the rest of the house. Although the invoice and payment was made 2 years ago the job is only 90% done. There is at least 10% installation to do before it's totally complete. I totally agree that the rest is not allowable but he insisted he can claim it. I'm still waiting to hear from his Accountant regarding this matter but no reply so far.

jp123

jamesm96

I guess it comes down to why they bought it. If it was always with the intention of providing security for this business then I suppose the pre-trading expenses rules apply and it's allowable, albeit complicated by a potential private use element.

Like Kelsmick says, you can claim a proportion of the costs of running the home too as 'Use of Home as office', but you need to be careful about creating a Capital Gains tax problem when they come to sell their house (unless it's rented..?)

I suppose if you can't demonstrate that the purchase of the security system was wholly for the business then, at a push, you might treat it as 'capital introduced' at its market value when first put in to the business, but it's a bit of a fudge and would be complicated but any private-use element. Depends how much the client might be up for a fight if HMRC inspected I guess...

phoenixd

You mentioned "I'm still waiting to hear from his Accountant." So, I assume you are the bookkeeper. If that is the case, simply put the cost in a suspense account and let the accountant deal with it. If on the other hand, you are the new accountant, ascertain why the cost was not accounted for whilst unincorporated.

jp213

Thank you for your replies. His Accountant said the home improvements are not claimable.

Milosz

If he is a contractor this can help http://www.churchill-knight.co.uk/blog/2016/05/what-expenses-can-i-claim-as-a-contractor-through-my-limited-company