Pre trade expenses on electrical work?

Phaver71

Hi
Can anyone tell me if electrical work is allowed as a pre trade expense? I work at home in a detached garage which already had an electric supply but I spent £900 bringing it up to modern standards and safety before officially starting the business. I know that building work or conversion work is not permitted as a pre trade expense but I just need a little clarification on whether this electrical work (as the supply was already in place) would be classed as repair/maintenance, which I have read is allowable.
Thanks!

Veteransaver

I'd just group it in with setup expenses tbh. HMRC could challenge it, but are probably unlikely to for a relatively small amount.

uknick

I'm assuming you're a sole trader.

First, decide if the the spend was "wholly and necessarily" for your business?

Then, ask yourself is there, or will there be, any personal use?

If not, are you saying the detached garage is now 100% your business premises, i.e. you never have any personal/non business use of it?  Have you gone to the council, insurance company etc. to register it as a business premise and paid the relevant business rates, insurance premiums?

But, do not just bundle it in with other costs and see if HMRC pick up on it.  You don't want to be the unlucky one that does get investigated.  You never know where that may lead for the sake of a few hundred £ in tax saving.

Phaver71

uknick said:

I'm assuming you're a sole trader.

First, decide if the the spend was "wholly and necessarily" for your business?

Then, ask yourself is there, or will there be, any personal use?

If not, are you saying the detached garage is now 100% your business premises, i.e. you never have any personal/non business use of it?  Have you gone to the council, insurance company etc. to register it as a business premise and paid the relevant business rates, insurance premiums?

But, do not just bundle it in with other costs and see if HMRC pick up on it.  You don't want to be the unlucky one that does get investigated.  You never know where that may lead for the sake of a few hundred £ in tax saving.

Yes, I never had any intention of just adding it in, if I was willing to risk fraud I wouldn't have posted.

I am a sole trader, I have started a dog grooming business in the garage at home. There is no personal use to the section of the garage that is being used for business. Planning permission was granted by the council, business rates are not applicable, business insurance is being paid. 

Since posting I have found this link BIM46945 - Specific deductions: repairs and renewals: assets on which capital allowances given - HMRC internal manual - GOV.UK (www.gov.uk)  I am on a cash basis for reporting purposes so capital allowances aren't allowed and from what the link says I am taking it that the electrical work is not an allowable expense?

I have changed the interior of the garage, all of that work and expense is not being claimed for as from what I can find it is classed as conversion. My only grey area was the electrics as they were not an addition or conversion as such, more an update and repair.

uknick

Unless you replaced the whole electrical system I wouldn't say the electrical work is capital in nature as it's not extending the life of the garage or adding additional facilities.  Hence the HMRC phraseology, "maintain in its original form".

But, if it is deemed to be capital, why not use accruals accounting and claim the capital allowances?