Hi All - I am helping a self employed hairdresser complete her SA. She set up in November 2013 and still works part time at the Council too. She bought a Summer House which she uses as a 'salon' in her Mum's garden. Can she claim any Captial Allowances for this? I've read and re read the HMRC site and I'm still no wiser! Thanks in advance.
-- Edited by Trojan1970 on Tuesday 9th of December 2014 01:55:21 PM
No, I'm affraid that no capital allowances are available for structures such as this.
Even the arguement that its a depreciating asset (it's a shed, it has a limited life) will not help as of course the depreciation would need to be added back in the SA calculation.
If however she had rented rather than purchased the shed and it was used wholly and exclusively for the business then such would be an allowable annual expense rather than an asset which would have reduced her tax and the amount tied up in assets (just be careful that any rental in not a disguised lease purchase (there must be no option to keep the structure at the end of the term or extend the rental at a reduced cost (such as £1 per year forever)).
Too late now of course for this client but if a client comes to you with that query in future it might be worth keeping that in mind that with certain caveats there is perhaps a more cost effective way (but ensure that you fully understand the rules related to leased assets before making any promises related to potential tax savings).
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Shaun, just a thought, as the summer house is in her Mum's garden, how would it be if her Mum was to charge her rent? Either for the summer house, or even for the space the summer house is sitting in? Thanks in advance!
The mother would need to charge rent on commercial terms which would result in her having to fill out a self assessment for the rental income (business opportunity!!!).
The rent itself would be of the land, not the building (which belongs to the daughter) so there is still no relief available on the actual purchase of the building itself.
Although no CGT relief is available on the shed (sorry, summer house, lol) if the mother rents out part of her property (the land) this may cause an issue if ever she sold the house in that the part of the residence that was rented out would not have main residence tax relief (although such would be pro rata'd to the time it was rented out).
All in all probably not worth the hassle as it still doesn't get around the issue of the money tied up in the summer house for which no relief is available and thats really what the client (as with many others who do the same thing assuming that the purchase would be relief baring expenditure) was looking for.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
