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Where Taxpayers and Advisers Meet

SMALL BUSINESS ENQUIRY & S74(b)ICTA 1988

domani
Posts: 4
Joined: Wed Aug 06, 2008 3:30 pm

Postby domani » Thu Nov 03, 2005 1:20 am

I recently sold a Newsagents which I owned and operated for three and a half months. I should confirm I also owned the property. No accommodation.
I took a 6 month lease (minimum period permitted by landlord) on a cottage to live in for the duration. My main residence was some 300 miles away in another county where my family remained.
We charged the full rental for the period as a business expense to the accounts for the trading period.The Inspector has come back and told us that, and I quote: "this is not a business expense and is specifically disallowable under S74(b) ICTA 1988.
The fact that your client resided away from his main home does not mean that the deduction claimed is allowable".
I looked up the INCOME TAX (TRADING AND OTHER INCOME) Bill on THE UNITED KINGDOM PARLIAMENT HOUSE OF COMMONS - EXPLANATORY NOTE....website. It says under Section 74 of ICTA 74(1)(b) of ICTA that and I quote: maintenance of the parties , their families or establishments, or any sums expended for any other domestic or private purposes distinct from the purposes of the trade, profession or vocation" are prohibited deductions.
I think the word "distinct" is in our favour here, since I was "essential" to the operation of the business for the period.? NOT TO MENTION THE LOGISTICS.
Perhaps there is other legislation that supports my case, or, perhaps my argument may be sustainable?

deanshepherd
Posts: 1019
Joined: Wed Aug 06, 2008 3:23 pm

Postby deanshepherd » Thu Nov 03, 2005 1:29 am

In my opinion the Revenue are correct.

There was no business purpose for you obtaining the accomodation, it was done to make it easier/viable for you to get to your normal place of work.


Dean Shepherd
dean.shepherd@mmi-online.co.uk
MMI Accountancy
www.mmi-online.co.uk

ahagyard
Posts: 26
Joined: Wed Aug 06, 2008 3:27 pm

Postby ahagyard » Thu Nov 03, 2005 1:35 am

Unfortunately, the Inland Revenue are correct on this one.

If you ran the Newsagent as a sole trader or in partnership then you, as the owner, can choose where to run your business. The fact that you chose a location 300 miles away from you house is up to you.

The Inland Revenue won a case, MacKinley v Arthur Young McClelland Moores & Co, which supports this view.

Sorry I could not help further

Andrew Hagyard
ahagyard@cta.org.uk

domani
Posts: 4
Joined: Wed Aug 06, 2008 3:30 pm

Postby domani » Thu Nov 03, 2005 3:19 am

Thank you for your replies, however, my argument is that there was indeed " a business purpose" for me renting accommodation near the business, since my day to day presence was essential to the running of the shop. Without my presence it could not have operated.I did not chose to live 300 miles away, initially this was a temporary measure. If I had kept the business I would have moved to the area.
Does the foregoing throw a different light on the argument?

tom 7000
Posts: 820
Joined: Wed Aug 06, 2008 3:30 pm
Location: Farnborough Hants
Contact:

Postby tom 7000 » Thu Nov 03, 2005 4:11 am

You could have bought a shop around the corner from where you lived, But you chose to buy the shop 300 miles away. You could have sold your home and moved....sorry buddy you'll have to bite the bullet and pay the tax...how many professional opinions do you want before you believe us...

domani
Posts: 4
Joined: Wed Aug 06, 2008 3:30 pm

Postby domani » Thu Nov 03, 2005 7:26 am

tom 7000
Thanks for your encouragement! I assume you are a Chartered Accountant.
ColHenry.


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