Farm Accounts


J

John Crook

Have just inherited a new client - a part time farmer on a rented farm.

He rents the land and his house. What is the accepted approach to adding
back the "private" element of the rent of the home?

I have heard that the starting point is one third of the portion of the rent
that relates to the house.

Any thoughts would be appreciated.

John
 
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D

Dave

Have just inherited a new client - a part time farmer on a rented farm.

He rents the land and his house. What is the accepted approach to adding
back the "private" element of the rent of the home?

I have heard that the starting point is one third of the portion of the rent
that relates to the house.

Any thoughts would be appreciated.

John
get a copy of his last accounts / SA and deduce accordingly
 
J

John Crook

Have done - and nothing written back. Cannot think that is correct.
John
 
T

Troy Steadman

A quick Google brings up:

"BUSINESS USE OF FARMHOUSES (Superseded by BIM55250)
A farmhouse on a working farm is generally a dual purpose building. It
is both the place where the farmer and his family live, and the centre
of business operations on the farm. Consequently the farmer uses it
for both business and private purposes and it is necessary to consider
the provisions of Section 74(a), (b) and (c) ICTA 1988 in determining
what proportion of the farmer's running expenditure on the farmhouse
qualifies for tax relief as a business expense.

In the past, tax offices were often prepared to accept, as a rule of
thumb, that one-third of a farmer's running expenditure on an ordinary
farmhouse was attributable to business use, and two-thirds to private
use, and to give relief for one-third of the expenditure as a business
expense. But a mechanistic rule of thumb of that kind -- applied
without reference to the facts of the particular case -- has long
since ceased to be appropriate. Inspectors have been advised for some
years that the business proportion of running expenditure on a
farmhouse should be determined by reference to the particular facts of
the case concerned.

In days gone by there were many more farm workers employed on the land
than is currently the case and the farmhouse was an integral part of
the farming operation. Workers would eat in the farm kitchen and might
live in the farmhouse. Nowadays many farmhouses are used for business
purposes only to a limited extent and the bulk of the expenses relate
to domestic circumstances of the farmer and his household. The
proportion of the running expenses of the farmhouse claimed for tax
purposes should be based on the facts of the case for the year of
account concerned and may require revision to reflect such changes in
farming methods."

I guess if you Google for BIM55250 you will be up to date.
 
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