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Tax implications of a limited company building a house for its shareholder.
My client operates a building business through a limited company of which he is the director and shareholder. He acquired a plot of land and has built a house on it. The possible complication is that the house was built by employees and subcontractors working for the limited company.
My client paid the company for the cost of the labour but this was only for the amount that the company in turn paid to its workers. In effect he has acquired a house at ‘cost price’. If the company had been carrying out the same work for a client at arm’s length it would of course have added a healthy premium to ensure that a commercial profit was made.
What are the tax implications here? Presumably the director could make an extra payment to represent the profit to the company. But suppose he does not....
Please reach out to customer services at +44 (0) 330 161 1234 or 'customer.services@lexisnexis.co.uk' for further assistance.
