Art for home office - tax deductible?

B

baz123

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Hi Guys,

I was wondering if I could justify buying art (under €2,000) for a home office as a business expense. I would have maybe 2-3 clients visit a week, and it is very much a work environment, but would it be acceptable to buy art within the business (as a tax free sole trader purchase?).

Thanks,
Baz
 
Hi

Is it wholy and exclusively for the benefit of trade? I would suspect no. It would presumably be quite possible for you to do the work of your business just as well without having works of art lying around the office/house. Therefore I would say no it cannot be claimed as a business expense. It is a personal expense ie an investment in art.

Kind Regards

dbran
 
First of all, it can never qualify as a business expense. It might theoretically qualify for capital allowances over 8 years, but on the other hand, as the previous poster said, it might not.

On another level altogether, any potential tax deduction or capital allowance claim that has the potential to cause future controversy or dispute with Revenue is best avoided, in my opinion.
 
Unless there has been a change in the legislation, there would be no problem with buying art, which would be for use wholly and exclusively for the promotion of one's business, having it treated as fixtures & fittings and writing its cost off over 8 years against Income tax.

The question you should be asking is what will be the consequence of this. Best illustrated with an example:

(Assuming you are, and remain, a high rate taxpayer):

Say you buy art at a cost of 8,000.
You display it only in a business premises, and therefore it qualifies for capital allowances.
So you deduct a 1k allowance from your profits each year for 8 years, saving you approximately 4k in income tax.

What happens when you either sell the item, or cease in business, or just put it in your sitting room? Well it is treated as a disposal of the asset, and gives rise to a balancing charge, as you have fully written the cost of the item off against your income. This balancing charge will be based on the selling price (or Market value) of the art. So if you've bought well and the item doubles in value, you get hit with 16k of extra income, or 8k of tax, in the year of disposal.

If on the other hand, you never claimed the item as a business asset, you would be liable to CGT when you dispose of it, on the gain, which in this case would be 16k - 8k. This would be a liability of 2k at current rates.

So under option one, you save tax up front, and get hit with a big bill at the end. Under option 2 you get no tax break up front, but a much smaller tax bill later on.

A separate issue worth considering here is that you propose to display the item in your home office. There could potentially be implications for the validity of PPR relief, if you start representing to Revenue that part of your house is used wholly and exclusively for business purposes...
 
Hi all,

All very valid points and duly noted, it isn't really a business expense in that context, hmm should've bought a plasma screen TV instead :p

No worries, still enjoying the painting :) will just file it as owners / private expenditure from an accounting point of view.

Regards,
Baz
 
mandelbrot said:
Unless there has been a change in the legislation, there would be no problem with buying art, which would be for use wholly and exclusively for the promotion of one's business, having it treated as fixtures & fittings and writing its cost off over 8 years against Income tax.

.....

A separate issue worth considering here is that you propose to display the item in your home office. There could potentially be implications for the validity of PPR relief, if you start representing to Revenue that part of your house is used wholly and exclusively for business purposes...
Click to expand...

Whether it is wholly and exclusively for business purposes is irrelevant as capital expenditure is specifically excluded from that definition.

To qualify for capital allowances it must be either plant or machinery. It's clearly not machinery and plant is not defined in the legislation. To determine whether or not it is plant you need to consider if it is part of the appartus for carrying on the business, or part of the setting in which the business is carried on. I would think the latter.

Good point about the PPR relief, especially as OP stated that it is "very much a work environment".
 
smeharg said:
Whether it is wholly and exclusively for business purposes is irrelevant as capital expenditure is specifically excluded from that definition.

To qualify for capital allowances it must be either plant or machinery. It's clearly not machinery and plant is not defined in the legislation. To determine whether or not it is plant you need to consider if it is part of the appartus for carrying on the business, or part of the setting in which the business is carried on. I would think the latter.

Good point about the PPR relief, especially as OP stated that it is "very much a work environment".
Click to expand...

Sorry, I may have been ambiguous in my wording originally - I meant that in order to qualify for full wear & tear, the "plant" must be in use wholly and exclusively in the trade. So if it's in the front hall of the OPs house / office, then an apportionment would need to be done:

[broken link removed]

"284 Wear and tear allowances
Summary​
An annual allowance (known as a "wear and tear allowance") is available to persons who incur capital expenditure on the provision of machinery or plant for the purposes of a trade. The allowance is given for a chargeable period (accounting periods in the case of corporation tax and years of assessment in the case of income tax) where at the end of the chargeable period or its basis period (that is, in the case of corporation tax, at the end of the accounting period and, in the case of income tax, at the end of the basis period for the year of assessment) the machinery or plant belongs to the person and is in use for trade purposes. While used for trade purposes, the machinery or plant must be wholly and exclusively so used."
 
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Sorry - you're right. Missed that, and it makes sense.

Still, it wouldn't qualify as plant.
 
Basically, the test applied in determining whether specific capital assets constitute plant is to decide if the asset is FUNCTIONAL to the operation of the particular type of business as distinct from merely representing the SETTING in which the business is carried on.

For instance, a petrol station canopy is a setting and therefore no capital allowances (CA) allowable. The petrol pumps are of course functional and CA are allowable.

The wholly, exclusively and necessary test isn't as relevant to CA, the main thing is it functional.
 
Paddy199 said:
Forgot to mention, artwork could never qualify for capital allowances.
Click to expand...

These crowds were/are talking through their hats then, which isn't surprising since they're trying to sell artwork!:
[broken link removed]
http://www.daffodilgallery.com/consult.html

It is allowed in the UK in some instances, http://www.hmrc.gov.uk/manuals/camanual/CA21130.htm, and I would imagine the same would hold true here, unless there is Irish Case law I don't know about.

But certainly in the case of the OP, he's barking up the wrong tree.
 
A UK case allowed murals in a hotel as plant as they created an atmosphere. Creating an atmosphere in a hotel serves a very different purpose than say in a solicitors office. If you visit a hotel the decor and atmosphere could add or take from the enjoyment of your stay. If you're going to sign your will it doesn't make any difference if there's a picture on the wall or not.

Those websites do state that professional advice should be taken and clarified with Revenue. You'll note the wording is exactly the same on both sites.

The Irish courts don't always follow the UK courts. To use the petrol station canopy as an example, the UK courts found it not to be plant where the Irish courts found it was.
 
Going back to the OP, it could never be allowable in this instance anyway. No mmatter what those websites say.
 
Never say never.

It comes down to function vs setting.

It's unlikely to be the case, but if the OP was (say) a psychiatrist and the painting was a particularly relaxing type of image hanging over the couch, then it'd be reasonable to claim capital allowances in my view.
 
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