Very confused - can someone advise?

[*Confused*]

Hopefully someone can help me with this question.

My husband and I bought two premises (sold as a package as they were on the same land but they have two different addresses).

One is a house and one is a large workshop. We would like to sell the workshop to our own business (we are a partnership) therefore making it a business asset. I have a few questions.

1. Do we sell it at what it cost us? or do we sell it at market value (as the property is worth more as a stand alone premises than it was as part of the 'package').

2. Is the full purchase price of the workshop (whatever that may be) allowed to be offset against business income?

3. What happens if the partnership dissolves in terms of tax - is it CGT or income tax that is payable on the value of the property?


Please can someone help as I am getting myself in a state about this now!

 

[Mitchells Bristol]

Hello there

Is the only reason you are proposing this course of action to make the workshop a business asset (presumably to get Entrepreneurs Relief on a future disposal)? If so, then transferring the workshop to the partnership may not be necessary.

If this isn't the only reason then can you let us know any other thinking behind the move.

Many thanks

 

[*Confused*]

Hello there

Is the only reason you are proposing this course of action to make the workshop a business asset (presumably to get Entrepreneurs Relief on a future disposal)? If so, then transferring the workshop to the partnership may not be necessary.

If this isn't the only reason then can you let us know any other thinking behind the move.

Many thanks

Hi

I am not very clued up and do not know about entrepeneurs relief

We want to use the workshop solely for business and thought it made sense to keep the business 'seperate' from all our personal bills.

We were hoping that the business buying the workshop would reduce our profits.

 

[Mitchells Bristol]

OK no wonder you are confused, its not the easiest situation to deal with - so:

1) Does the workshop have its own title number with the land registry, distinct from the main house?

2) Does it have separate entrance/gas/electric supply etc;

3) Would it be capable of being sold separately to the house?

Thanks

 

[*Confused*]

OK no wonder you are confused, its not the easiest situation to deal with - so:

1) Does the workshop have its own title number with the land registry, distinct from the main house?

2) Does it have separate entrance/gas/electric supply etc;

3) Would it be capable of being sold separately to the house?

Thanks

1) Yes

2) Yes

3) Yes

If I'm honest I am trying to find a legal way of reducing my partnership profits for this year. The workshop cost us (pro rata) approx £20k and is worth approx £35K if sold on it's own.

 

[Mitchells Bristol]

If I'm honest I am trying to find a legal way of reducing my partnership profits for this year. The workshop cost us (pro rata) approx £20k and is worth approx £35K if sold on it's own.

Aha - if you are thinking that you can claim the cost of the partnership "buying" the workshop from you against your partnership profit, then unfortunately that isn't going to work.

You could potentially charge the partnership a rent for using the workshop, but it will just be taxed on you as rental income, so at most would save class 4 NIC and may cause other tax complications.

Presumably you are already claiming electric, gas etc related to the workshop?

There may be some capital allowances that could potentially be claimed, depending upon what was in the warehouse when you bought it - but I suspect this would be minimal

 

[*Confused*]

Ok thank you very much for your time

 

[David Griffiths]

There seems to me to be a significant aspect to the above that has been overlooked. Namely that under the legal system in England and Wales a partnership cannot own property - the property is owned by the individual partners. (Scottish law might be different)

Given that that is the current situation there is no transfer that needs to be or indeed that can be made.

Under the situation as described, nothing need be done to make the workshop a business asset other than to use it as such.

As Taxonomy says, the cost of the building itself cannot be deducted from partnership profits, but there may be some mileage in looking at a capital allowances claim, as there could be a substantial amount that can be attributed to integral features such as electrics, plumbing, heating etc.

(I'll point out there that I am an accountant not a solicitor, but I believe that the above legal situation is correct for normal partnerships, which have no legal status in England and Wales)