Business Asset used for Private Use

PianoPlayer_2

Hi,

I have a Limited Company with excess company profits in the bank and I'm wondering whether I'm allowed to purchase assets for non-business use.

For example, I'm looking at purchasing a piano for around £15,000. Can my company purchase this and treat it as an investment/asset and retain the profits when it is sold? Especially as the piano is below market value and can most likely be sold at a profit in a few years time (which is the plan).

Alternatively, could my company purchase the piano and then rent it out at market rates to myself or my spouse?

I'm the sole employee, director and shareholder of my Limited Company and I do IT contracting on a day-to-day basis. I'm not sure whether this restricts my company to doing IT-related activities, or whether renting a piano would be allowed.

I'm assuming this can't be done (otherwise people would buy TVs etc) but have spent the last few days searching the Internet fruitlessly for answers.

I'm not interested in doing anything illegal and I'm not really interested in claiming depreciation or tax breaks. I just want to know whether I can put the excess money to use.

Murdina

If your company buys a piano and it is available for you to use, then you will pay tax on the benefit. In the case of assets made available to an employee, the tax charge is 20% of the cost each year. You need to weigh this against the tax cost of paying out excess funds as a dividend and using those to pay for the piano. If the piano is just owned by the company as an investment, then this may have other implications in tax terms e.g. it may affect business property relief on the company's shares if you died. Companies do sometimes invest in stuff which is of interest to directors (quoted shares spring to mind) but the "tainting" of trading status for the purposes of various tax reliefs can often be a reason not to do this.
It is also possible that investing in this way is ultra vires the company's objects, but if you have fairly general objects you are probably OK.
If you think the piano may prove a good investment then think about how you would realise that investment and get the money out of the company. There could be CGT on the piano and then further tax on getting the proceeds out - hence why I suggest it might be better to extract funds now and buy the piano personally.
Hope that helps you take a view one way or the other!