Home business - tax implications

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
On completion of the AAT course I have been asked to provide some (free) guidance for a friend who is setting up a home business (sole trader) making Wedding and birthday Cakes.
She will be using the family kitchen for baking the cakes.
They are about to have a new kitchen fitted so I guess that a percentage of that cost can be claimed as a first year allowance and that a percentage of the running costs of the home can be claimed as a business expense (to be agreed with the local tax office).
As no area of the home is to be used exclusively for the business am I correct in saying that there won't be any CGT implications if ever they decide to sell the house?
Any comments on the above will be gratefully received!

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Home business - tax implications

    This is a complicated area. I have had several complex answers on this subject. I would suggest that you put all the details in writing to HMRC and get a written response.
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Home business - tax implications

    I would echo what TC has said. Homeworking is a particularly grey area in terms of HMRC interpretation. Broadly, capital allowances can be claimed on equipment which is used wholly and exclusively for trade purposes only - however the equipment being used by your client is not wholly and exclusively for trade and I therefore suspect the capital allowances (if any) will be restricted to the %age of business use.

    In terms of CGT normally the %age of floor area which is used for business purposes is disallowed for PPR. Again, this should be confirmed by HMRC in their reply.

    You have done the right thing in requesting clearance from HMRC as my experience suggests that Inspector's are often misled in their interpretations of complex tax issues.

    Kind regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:Home business - tax implications

    Steve, TC, thanks for the replies - as a recently qualified "novice" I am now been asked for lots of advice from self employed friends so it's good to have the expertise of the forum to give me a little confidence that I am heading in the right direction. :lol:

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