The Ultimate Guide to Tax and Garden Offices
Due to Covid-19, this last year has seen such a change in our working behaviours with many being forced to work from home. This is led to many people reviewing if this is something they want to continue going forward and if so how it can be managed. For some, it is easy to work from the kitchen table or the spare room for others they need a clear divide between home life and work life. This has led many people to look at their options and to consider a garden office.
A garden office could be as simple as an ordinary shed costing a few hundred pounds fitted out with a few extra comforts – lighting, heating and insulation to a purpose-built garden office costing more than £20,000.
Can I put the cost of a garden office through my limited company?
The good news is that yes you can get your limited company to pay for the cost of your garden office, but you need to be fully aware of the tax consequences of doing this.
Can I claim tax relief on the cost of a garden office?
The office is considered a structure for tax purposes, so while the cost of the building and installation is not fully tax-deductible expense the company can still pay for it.
The alternative is for you to pay for it out of your personal after-tax income and then charge rent to your company.
What about any other costs?
While you don’t get tax relief on the cost of the office build and installation you can get tax relief on the cost of fixtures and fittings – electrics, plumbing, insulation, furniture, carpets, lights, blinds.
You can also claim for ongoing costs such as electric, water, repairs and maintenance.
Can I claim back the VAT on the cost of a garden office?
If your limited company is vat registered, then yes you can claim back the vat on the cost of the building and installation of the garden office and the fixtures and fittings.
However, there may be restrictions to what you can claim if your company is either on the flat rate VAT scheme or a partial exemption scheme. Speak to your accountant if this applies to your limited company.
Can I use the garden office for non-business purposes?
Yes, you can use the garden office as space for children to play in, to watch films, read books etc; but there will be a tax charge that needs to be reported to HMRC for this personal use. This tax could be substantial and may mean it is better to purchase the office personally.
Do I need planning permission for a garden office?
This depends on the size and location of your garden office. Most residential properties have what is called ‘permitted development rights’ which usually means garden offices, conservatories, garages can be build without needing planning permission.
However, it is recommended that you discuss this with a qualified professional or your local council planning office just to confirm that you don’t need planning permission.
If you do construct a garden office and find out afterwards that you did need planning permission, you can still apply for it retrospectively.
Will I have to pay Capital Gains Tax when I sell my house?
If you use your home or part of your home, and that includes a garden office for partial business use (i.e. not 100% exclusive business use) then you will not have to pay Capital Gains Tax (CGT).
If you use your garden office for 100% business purposes, then yes you may have to pay capital gains tax on part of the profit made on selling your house.
The CGT charge would usually be limited to a percentage of the overall profit on the sale of your home based on the amount of your property the office occupies. So, 5% space means 5% of the gain. And it's likely that the profit will be covered by your annual capital gains tax allowance.
If you are thinking of purchasing a garden office, please give us a call on 01423 431889 and we would be happy to help you decide how best to buy and structure your new garden office.
Please note: all information is accurate for the 2020/21 tax year.