In these rapidly changing times many business owners are looking, or having, to work from home and for some this involves working on the kitchen table or a spare bedroom. Whilst this works in the short term in can become challenging in the long term.

If you don’t have a designated home office space, home-working in the kitchen, lounge or even bedroom can lead to the feeling of always being 'at work'. Could a garden office be the solution to this? One of my good clients started his business with a garden office and he told me it was great, as he left his front door in the morning it felt like he was going to work and was able to close the garden office behind him on an evening.

So what are the tax treatments when purchasing a garden office? Well, like everything in life, it depends. If the building is going to be used 100% business that makes things a lot simpler and, for the purposes of this article, I am going to assume that is the reason for purchase and that you wouldn’t want social gatherings in your office. If private use was argued then additional tax could be due on the director/employee as a Benefit in Kind

VAT

VAT will be 100% recoverable on the purchase and decoration of the garden office, together with all the equipment and furnishings required unless you are in the Flat Rate VAT Scheme. If you are in the flat rate scheme, you can only reclaim the VAT if the purchase price is over £2,000 and you will not be able to reclaim the VAT on decorating as this will be a revenue expense.

Corporation Tax

Many believe that purchase of a garden building should attract corporation tax relief as the building is moveable however it falls under the definition of a “structure” so receives no relief. Attention needs to be made here towards planning, design, delivery and installation costs as these will all form part of the purchase price and will not be tax deductible.

Corporation tax relief can however be claimed on furniture, curtains, office equipment & shelves by way of capital allowances and if your business hasn’t used up all of its annual investment allowance then you will be able to get 100% relief on these costs.

It also maybe possible to claim capital allowances for any thermal insulation and any wiring/plumbing within the structure.

Running costs

Heat and lighting costs are tax deductible as are any repair costs going forward. If you set up a metred water supply this too will will also be tax deductible In order to get tax relief for broadband you would need to have a separate line for the office to that of the home.

Selling the garden office

As the building will likely be worth less than you paid for it there will be no corporation tax to pay on the sale proceeds as you never claimed any relief on the purchase.

For further information please get in touch.