Home business & capital gains

[NT8SeaterTaxis]

Good morning all,

Just a quick question, it's not actually for me but a friend of mine.

Long story short... she bakes cakes for family and friends, never been a business, however she has recently registered as self employed for a different opportunity (she's a passenger asst for disabled children on one of my school runs)

As she is now self employed she is thinking of doing the cake baking as a business. I say thinking about doing it but in reality her husband has built her a purpose built out house with electric ovens etc. Pretty much ready to go.

She came to me with the idea, and I had recently read a post on here regarding business from home and capital gains if she was to sell her house. I told her of this (cant find the post) and told her she should look into these things before jumping in.

So here I am asking what is the actual reality regarding this. I told her I'd ask and see what was said. I'm not 100% sure on it so have came here for the expertise.

I think she thinks because she is already registered as self employed it would be quick and easy but that's NEVER the case Haha.

Thanks for your help

Chris

 

[Scalloway]

If the room she uses for the business has other domestic uses then there will be no CGT. If she uses a room exclusively for business then that part of the house will be considered seperately when the house is sold.

 

[NT8SeaterTaxis]

What do you mean considered separately?

Basically she has an out house (conservatorie) and she has built on the side of that and its attached to the wall in the front of the property as well. Its decked out for her kitchen use, so she can bake and sell cakes.

I told her its risky and that I would ask what CGT is etc and how it would affect her.

 

[Scalloway]

When the house is sold the proceeds of the sale will be split in two. A gain on a Principal Private Residence is exempt from CGT. The part used exclusively for the business will be valued separately and CGT calculated on any profit.

 

[NT8SeaterTaxis]

As it's a wooden kitted out hut and could probably be taking down, temporary building. would that still count. Say it takes up 25% of the garden area, would then that mean 25% of the garden would be valued differently.

The more I read what I write I realise how stupid I sound Haha. I should of just kept out and let her get on with it. However as I've started I may as well finish.

 

[Scalloway]

I'm afraid I don't know enough to go into that kind of detail. If you want chapter and verse on the options one of you needs to speak to an accountant.

 

[NT8SeaterTaxis]

Think the saying Mind ya own business comes into effect here.

Thank you for helping. Much appreciated. I think this is where i tell her she needs to talk to a professional herself.

Back to my business I scuttle. I need to know when to keep out of things lol.

Thank you Scalloway

 

[namesweb]

Can't she just remove the ovens before she moves out, put it back to how it was previously, and just consider the conservatory as part of the house? No idea why she'd have to declare it being separate. I started off a catering business from my garage (converted it out, had the council to give me the hygiene rating etc.) We since moved into a unit, and whilst the ltd co was registered to the house, it never specified in the garage, just the address.

If it possible I'd just use the space for what she needs, dismantle upon sale (or at such point she needs to move to a unit) and just consider that space back to being used as part of the house.... Not sure why she'd sell as is and have CGT complications?

 

[STDFR33]

Can't she just remove the ovens before she moves out, put it back to how it was previously, and just consider the conservatory as part of the house? No idea why she'd have to declare it being separate. I started off a catering business from my garage (converted it out, had the council to give me the hygiene rating etc.) We since moved into a unit, and whilst the ltd co was registered to the house, it never specified in the garage, just the address.

If it possible I'd just use the space for what she needs, dismantle upon sale (or at such point she needs to move to a unit) and just consider that space back to being used as part of the house.... Not sure why she'd sell as is and have CGT complications?

Because if part of the home is used exclusively for business, it doesn’t get PPR for that period regardless of whether or not it is put back to how it was.

 

[kulture]

It’s that word “exclusive “, if it was occasionally used for cooking the food for Sunday lunch, or a birthday, and some household goods shared the storage then it would not be classed as business and capital gains would not apply.

 

[NT8SeaterTaxis]

Thank you for all your comments. After informing my friend she is probably better off talking to an accountant herself she is doing that on monday morning.

Appreciate the results.

On another note it's quite addictive reading through these forums. I need to concentrate more on work lol