Advice on extension & whether possible business expense

blue_monkey_2

Hi All,

I am not sure where or who I turn to advice here and have looked through some stuff and still none the wiser.

First off, we live at my mums house, 3 bed semi. I am self employed and every bbit of money I earn is being put back into buying new stock. I do not have business premises and keep the stock in our garage.

However, it is getting as such that we need more room. We store in the garage and under our bed and in cupboards but now we are having to start using the loft. I work from home as I have 2 children under 4 and want to be at home with them.

My question is this. Where and how do we go about planning for an exention. It would a the length of a double garage and 2 storeys high and also the loft. The amount of stock I am accumulating now means it is just not viable to keep it in our little garage, we need something mroe secure and having a 3 bed house we simply do not have much room. The whole roof part of the house would be converted to a storage area for the clothes that I sell and we will still use the garage as well. Does anyone have any idea of how much it would cost for an extention of this size to be done. Just vaguely would be of a help if anyone has had one done recently. How do we go about getting plans done and submitting them, what happens then, etc... we are blind on this completely.

On the other side, is it possible that this expense can be put down to the business. I am not sure how it would work, I have a business acocunt and would speak to the bank as they can quite clearly see how my turnover is increasing but not sure how this would work as the house is in mums name and she is on the deeds and the loan would have to be in my name. Maybe if she drew up a will so that if anything happened my brothters and sisters do not take it with the loan on the extra being in my name. It is very confusing. I don't want to have a unit away from home, for us this is just not practical without a lot of travelling back and forth and with me being out all night, I can't do it so much in the day.

Any advice would be appreciated, I am also wondering if we paid for the extention outright with our own money whether this would justify a valid business expense as well else we will have to pay tax on the money we use from the business to make the extention. Thanks.

clutton_2

i think you may be in danger here of becoming a fully operational business in a residential area, which The Planning Department will not like one little bit. Also, if you are putting huge amounts of weight into your roof space, you may one day find that your ceilings have collapsed !!! If your business is expanding this fast, then you clearly need a proper business premises. If one of your neighbours reports you, you may have to stop trading if the Planners come round to inspect what is going on.

on a different note - is it essential to carry so much stock ? it is a lot of money tied up ?

lilybugs

Please look into the tax implications. I'm no expert here and think that you should possibly post on a different board.

If you pay for an extention through the business I guess it would ineffect belong to the business and therefore be liable to any complicated tax issue if you ever come to sell.

Debt_Free_Chick

blue_monkey wrote:

My question is this. Where and how do we go about planning for an exention. It would a the length of a double garage and 2 storeys high and also the loft.

You will almost certainly need planning permission, but call the planning department at your local district council to confirm. I assume that the building is not Listed and you are not in a conservation area.

The amount of stock I am accumulating now means it is just not viable to keep it in our little garage, we need something mroe secure and having a 3 bed house we simply do not have much room. The whole roof part of the house would be converted to a storage area for the clothes that I sell and we will still use the garage as well.

But this is a house - so the extension can ONLY be an extension to the house. You almost certainly will NOT get planning permission to add (effectively) a warehouse on to a residential dwelling. So, if you are going to build an extension, plan for extra living accommodation. If you then decide to stuff it full of stock, that's not a problem (but see my comments later). You can leave an extension completely empty and, from a planning point of view, there is no problem.

Does anyone have any idea of how much it would cost for an extention of this size to be done. Just vaguely would be of a help if anyone has had one done recently.

Yep - me

Start at £35-£40k - but it really depends on the total square footage. Total cost could be much more ... it depends on how you plan the interior and the finishing you require (remember, you will be building an addition to your home so what is constructed must be rooms that can be lived in).

How do we go about getting plans done and submitting them, what happens then, etc... we are blind on this completely.

Get a builder and an architect/surveyor together and let them talk to you about the options for using the space. Make sure the builder gives you rough ball park figures for each option, so you know whether you're talking about £40k or £75k! :eek: Talk through all the options, mull them over, decide what you want and then get the architect to the plans, submit them for planning permission and when you get it, get the builder on the job.

On the other side, is it possible that this expense can be put down to the business.

This is a complete nightmare! Firstly, as this will be an extension to a residential dwelling, you will not be able to claim that the expense is "wholly and exclusively for business purposes". That's the acid test for expenses that can be claimed as a tax deduction. I know you want to use the space for storage, but it will not be a business unit - it can't be, as it's an extension to a residential property.

I am not sure how it would work, I have a business acocunt and would speak to the bank as they can quite clearly see how my turnover is increasing

But they will only be interested two things. Your profit (not turnover) and the security you offer for the loan. Yes ... a loan of this amount will need to be secured. And where it's for an extension to a property, it will be secured against the house. Either as a mortgage or a secured loan.

but not sure how this would work as the house is in mums name and she is on the deeds and the loan would have to be in my name.

As you don't own the property, you can't offer it as security. The only way to change this is for your mother to give or sell you a share in the property. Even then, any new mortgage will probably have to be taken out by both of your jointly. And there are all sorts of complications around inheritance tax planning and other tax issues .... You would certainly need some specialist advice and the whole idea makes me feel a little uncomfortable. You would never get your money back unless you sold the property ... how would your mum feel about that?

Maybe if she drew up a will so that if anything happened my brothters and sisters do not take it with the loan on the extra being in my name. It is very confusing.

Yes - I'm confused too

I don't want to have a unit away from home, for us this is just not practical without a lot of travelling back and forth and with me being out all night, I can't do it so much in the day.

I have to say that a secure lock-up would be a much better solution. Must you carry so much stock? Could you not use a distribution company who would hold the stock and then dispatch the orders as you send them through?

Any advice would be appreciated, I am also wondering if we paid for the extention outright with our own money whether this would justify a valid business expense as well else we will have to pay tax on the money we use from the business to make the extention. Thanks.

Answered above - I can't see funding for an extension to a house as a bona-fide business expense.

There is nothing to stop you working from home or storing stock at home, but you need to be careful that you are not "operating a business" from the property. That can create problems re Council Tax, planning (as the property will not be approved for business use) and potentially capital gains tax too. I think you're OK as you are, but the creation of a specific "stock room" would almost certainly class you as "operating a business" from the property. Another reason why you should not even think about building an extension to store stock.

I see too many complications for your idea to be viable. I think you need to look at other alternatives e.g. carry less stock and/or use a distribution company.

HTH

seven-day-weekend

You are allowed to operate a business from a residential property, but it must not alter the residential nature of the house (i.e. if you just had an office in a bedroom, or a mitre-cutting saw and a mountcutter in a conservatory). The nature of the property must remain mainly residential.

You are in danger of changing the nature of your home to a business premises. The business use is more than, or equal to, the residential use.

You may well hit problems with planning permission if this carries on and if you want to build an extension purely for business use, you will certainly hit problems! You would have to apply for a change of use for at least part of the property, if not all of it, from residential to business use, and in a residential area, this would almost certainly not be granted.

I suggest having separate storage facilities for your stock. You can still work at home, providing your business is not pollutive, or noisy, or involves a lot of traffic movements, and that the nature of the property remains residential. Better to do this than be in trouble with the Planning Authority where you could face a large fine if investigated.

Remember....your home must be mainly RESIDENTIAL with ancillary (and minimal) business use, not the other way round.

I used to work in Planning Enforcement until 2004.....we dealt with things like this all the time.

Hope this helps, sorry if it's not what you want to hear.

blue_monkey_2

Hi again, thanks for the input with my query, it helps get a lot of things into perspective. To answer the questions that were put here. Do I have to carry so much stock? Yes is the simple answer really. I sell ladies underwear, there are hundreds of styles, brands, colours, sizes, etc.. so unless you want just one item of each then you do need the stock. I like to have 7-10 of each size and there are over 100 sizes available - you cannot sell what you do not have and if you do not have something for everyone you are not running your business efficiantly.

I have spoken with the council already as we was considering moving to a rented house and using half the property for business, they told me that this was not a problem as long as we did not have a lot of callers/deliveries and the neighbours complained. Then they were not really that fussed about it because I am a mail order company and don't have callers and maybe one delivery a week (if that).

In regard to the extention. It would be residential and would be built as such as we live ehre but while we were here we would use one of the rooms for storage and another for a fitting room/office on the upper part of the house and the garage to store as we already do. The reason for needing the space is because I want everything railed rather than boxed as it is easier to take stock of and pack parcels from. There is not a lot of weight (you should see what we took out of the loft!!) more that I like to be organised and getting it on rails is the only way to do this and that obviously takes up more room. I work from home, do not have callers and my business is based online. At the moment we have a garage to the side of us. We cannot insure the stock because the garage is not that brilliant but we have it secured enough to know it should be OK. We also use our house for storage - again this is something we are allowed to do and we claim pro-rata allowances for this and have everything verified with the tax office. I like to make sure all is above board and correct before I proceed with anything as I have 2 young children and getting into trouble is the last thing I want.

As for turnover, we do not have as of yet because as much as we are earning we are buying stock with - hence needing the room. I sell the past season branded lines, if I cannot buy it when they are cheap then everyone else does and you don't have stock to sell then you have no business. We run a website on the other side of things that we do take the orders and then order from our supplier and send on when they have arrived - however, the main bulk of my business is on eBay and the turnover of stock is quite fast.

In regard to getting the security for the money. Yes, this is something we would dicuss with my mum and because we would be putting value onto the property would want a share when it is sold before my brothers and sisters were able to get theres. People have told me they can contest any will so I would not even cosider it anyhow if my brother and sister was to get any of the money we have put into the house. So, to be honest this is not worth discussing with her while there is no chance of it happening. She would agree, with us not here she cannot afford to keep the house as we pay for everything, however we have a young family and we need some security and this was an option. If nything (god forbid) happened to mum then we would be on the streets the next day and the rest of the family would be in here rummaging through and taking our stuff. This is not security for us and we cannot afford a mortgage of our own. The reason I mentioned about it being business is that we could earn enough for the extention on about 2 years and have the mortgage/loan paid. Everything would be drawn up legally so mum loses nothing. You are right though, it is complicated and we are just considering our options. it is hard as if we have not got something sorted in 2 years we have to go and find somewhere of our won and this means mum loses our house. it is OK trying todo the right thing and look after her but if anything happens no one will look out for us. They try to get mum to kick us out at every opportunity and have offered to buy the house off her already and mum said no, it goes at market value (they offered her 1/3 of it's worth - hence them not liking us here and trying to get us out all the time. While we are here Mum gets the house renovated and puts value on it and then they cannot afford the market value)

So I wanted to get the opinion of others that might know more about it really, this is why I posted. All would be legal and above board, or when my mum comes to reveiw her mortgage we would also use our salarys so she could borrow more money as we pay the mortgage anyway but what is the point of this when your bothers and sisters are constantly trying to evict us?

I hope this all makes sense and explains a little more really. We are trying to get our head around things for the future really. We are stuck between looking after mum and looking after ourselves. It is really hard BUT I think my childrens security must come first which is why we are going to need togo. We have been on the council list for 8 years so another 2 years and it will be 10 years so I am sure we would get something sooner or later. Just putting some thought together. Thank you so much for your honest opinions, this is why I posted.