Garden Office – Tax relief? With the current situation, more and more people are working from home and enjoying the flexibility and lifestyle this offers.

I am now receiving more enquiries from clients who are thinking of making this a more permanent work/lifestyle decision and want to build an office in the garden.

But what are the tax implications?

Well, many and here are just some of the points that should be taken into consideration!

If you purchase the garden office through your company which you use 100% for your business then this should be acceptable to HMRC. There may be the opportunity to claim capital allowances on the furniture, shelving, chairs, desks, storage and computers. This may also include thermal insulation, certain electrical wiring, lighting, air conditioning and heating and water systems. However, it is not usually possible to obtain tax relief for the structural costs

Ongoing running costs of the office such as electricity/gas, repairs etc should be able to be claimed

What if there is private use of the garden office?

If there is any private use then there will be a benefit in kind which will result in personal tax being suffered. You will have to document how you achieved the proportion of private use and then calculate the potential tax liabilities that will arise.

Are there any Capital Gains Tax implications?

The general rule for your home is that it is free from Capital Gains Tax when you sell it as it should qualify for principal private residence relief.

However, if you have a garden office that is used 100% for business then HMRC will possibly seek to obtain CGT on the proportion that relates to the garden office

Business Rates?

It is also worth noting that some councils may charge business rates for you to run your business from a garden shed! You may wish to explore this risk with your local authority.

VAT?

If your company is VAT registered and you are not using the VAT Flat Rate Scheme then you may be in a position to claim back the VAT. However, if there is any personal element then you will need to adjust the claim accordingly.

I hope the above is helpful as a general guide for some of the points to be considered and it is important that you obtain tax advice before you undertake such a large investment

Further Reading:

Check which expenses are taxable if your employee works from home due to coronavirus (COVID-19)