As more and more people are now working from home, the desire for a designated workspace has become a top priority for many, which is why claiming tax relief on a garden office is such an important consideration right now.
The past year and a half has forced many workers to work from their kitchen table, bedroom or whatever free space they kind find in their home but we know this isn’t a sustainable way of working, particularly when you have family sharing your space too.
With so little internal space available in a crowded home, many people are now seeking to build a permanent home office, but with extensions and loft conversions expensive, a larger percentage are instead building offices in the garden.
In this blog, we will explore the tax implications for those running a business from home and how a garden office can affect your tax position.
Can I claim tax relief on a garden office?
A garden office/outbuilding is normally considered a structure and therefore it is not possible to claim tax relief for the costs of the building/shed, even if it is moveable. This includes all costs of any planning, foundation work and installation.
However, it is usually possible to claim tax relief by way of capital allowances on some fixtures and fittings, such as those specifically required to enable you to do your work.
For example, this could be WIFI cabling, thermal insulation, CCTV and specialised lighting, but would not cover usual integral fittings like doors and floors and ordinary wiring.
You can also claim capital allowances on furniture and equipment needed for the office for work purposes, such as office equipment, shelving, desks and seating.
Usually, you would claim capital allowances for the full cost in the year of purchase, by way of Annual Investment Allowances (AIA) subject to a cap.
However, you wouldn’t purchase through a company if there is expected to be personal use on the outbuilding.
In addition to capital allowances, tax relief can be claimed on the revenue costs incurred for the running of the garden office, such as electricity for lighting and heating, and for the general repairs and upkeep.
Can I claim VAT?
VAT incurred on the cost of the structure itself or any furnishings or furniture can be reclaimed if it is solely used for business, and VAT can also be reclaimed on the ongoing running costs.
You must ensure there is a VAT invoice addressed to the business to support any claim, as per the usual VAT rules.
What personal tax might I pay?
If a garden office is used exclusively for business, and if you are a company, you will not pay any benefit in kind tax on it.
Benefits in kind are chargeable to tax when a company pays for personal expenses for an employee or director.
If the garden building was incurred by a company and it was also used personally for other means or by other members of the family, this would then trigger a benefit in kind charge and the tax due could well outweigh any tax savings, dependent on circumstances.
Also, if you were to include the building cost as a business cost, you may have to pay capital gains tax on it when you sell the house if there is a value in it.
The amount you’d pay would depend on the percentage of the land the garden office takes up.
If you have any queries or questions about claiming tax relief on a garden office, then give us a call at 01484 441431, or email our team at hello@itsrelative.co.uk. We are here to help.