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Long gone are the days when everyone did their 9-5 in an office an hour away from home. We’ve adapted to a ‘new normal’ post pandemic, meaning lots of business owners work where they’re most productive. Whether that be from the comfort of their own home, a coffee shop, or even on a sunny beach as they travel around the globe.

If you dislike sand but love the outdoors, you may have thought about creating your own garden office, just in time for summer. But can your business pay for it?

This question is much more common than you may think – which we’ll discuss in this blog.

Yes, it can, but it won’t be classed as a tax-deductible expense. Instead, your garden office would be classed as capital expenditure. If you’re unfamiliar with the term, capital expenditure refers to any long-term investment your business makes. So, think of assets such as property or furniture expected to have a ‘useful’ life of more than 12 months.

This means that the property itself won’t qualify for immediate tax relief, nor would it be classed as an allowable expense against your business profits. But it’s not all bad – there are other types of tax relief you may be able to claim that’ll help you run your garden office.

Capital allowances

You might not be able to claim some of the costs of installing and equipping your garden office as a running expense, but you may be able to claim tax-relief using capital allowances. These can help you reduce your tax bill if you buy assets for your business, such as furniture and equipment, but it can’t be claimed on the building itself.

You’ll be able to claim for things like installing power, for example light fittings or any other electrics you have built in, or heating to keep you warm, etc.
 

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You can reclaim VAT back when building your garden office if your company is both:

You won’t be able to reclaim back the full amount of VAT if you use your garden office for personal use as well as for business purposes.

If your company pays for your garden office and it is used for personal use, it’s worth noting this may be classed as a Benefit in Kind. This means you may have to complete a P11D and pay income tax (as it’s a taxable benefit).

You can claim for capital expenditure for the goods you buy over £2,000 (as long as it’s on the same transaction/receipt) – and the good thing about this is there’s no limit on personal use. So, you don’t have to figure out a proportion of what you can claim.

There is a catch though – you can only claim for goods and not services. For example, you can claim back the cost of buying the shed, but not the cost of how much it was for someone to come out to construct it.

It’ll be the same with electrical wiring and furniture – the goods themselves can be reclaimed but any type of service cannot. Lots of suppliers can show the goods and services separately on their invoice though, so you don’t have to sit and figure it out yourself – just make sure you ask when it comes to being quoted and invoiced.

It’s best to check with your local authority – but in most cases it’s unlikely, unless your garden office is more than 2.0 metres from the boundary of your property, or its overall height is more than 2.5 metres.

This depends, and usually a decision is made on a case-by-case basis.

Someone who runs their limited company from home, for example from their living room, won’t qualify to pay business rates. Whereas a beautician who’s turned their garage into a beauty parlor may be subject to business rates because changes have been made to their home.

It’d really depend on the scale of your garden office and where you’re based, as every area will have a different outlook.

If you sell your property, and your garden office is used exclusively for business use, then yes, you’ll be subject to Capital Gains Tax.

However, if you do sometimes use it for personal reasons (like to watch the footy!) you won’t be subject to any Capital Gains Tax – but you will lose out in VAT claims and income tax relief.

It’s worth noting this can get complex – especially if your garden office building is fixed (so basically, you can’t take it with you!). This is because if the property is sold, it’ll still be part owned by both the limited company and its director/s. In this instance, it’s best to speak with an accountant for further advice.

Need some advice setting up your garden office? Call us on 020 3355 4047 or get an instant quote online.

About The Author

Rachael Johnston

A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people! Learn more about Rachael.

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