Question:
In 2012, I built two domestic type commercial semi-detached properties. The planning consent was for offices class A2 and I made a planning application to the local council for change of use from A2 (offices) to C3 (residential). Both semis are now fully complete and fitted as offices and have not yet been occupied. The units are newly built. If/when we convert these two office units to residential can we claim the conversion costs as ’qualifying expenditure’?
Arthur Weller replies:
If you look at http://hmrc.gov.uk/manuals/pimmanual/PIM2020.htm I think you will conclude that converting office premises into residential units is basically capital expenditure (although some of the expenditure maybe eligible for limited capital allowances - see http://hmrc.gov.uk/manuals/pimmanual/PIM3005.htm and http://hmrc.gov.uk/manuals/pimmanual/PIM3200.htm). This means that you should keep all the invoices of your building work, and when the property is eventually sold you can add this expenditure to the original cost of the property to reduce the capital gain.
