Claiming tax relief for a garden office

During the pandemic, millions of us were forced to work from home and many continue to embrace this change.

If you run your own company, you might have considered installing a garden office as a workspace – but have you thought about the tax implications?

Initial build costs

It is acceptable for the initial cost of the structure, and any other associated expenses, such as planning costs, architect fees and legal fees to be paid in full by your company.

However, these costs will not qualify for tax relief, as they will be treated as capital costs.

There are certain elements of the build which might however attract tax relief through the capital allowances regime, including:

  • installation and supply of power;
  • certain new fittings and fixtures etc;
  • installation of heating equipment;
  • thermal insulation;
  • air conditioning.

A detailed inventory should be kept of all parts of the build cost to support any claims for capital allowances.

What is the VAT treatment?

If the garden office is intended for 100% business use, the VAT charged on the capital costs may be recoverable in full by your company (assuming it is VAT registered).

However, if there is an intention for an element of private use, then a proportion of the VAT should not be reclaimed.

Similarly, once the office is functionable, ongoing costs such as light, heat, redecoration and repairs may be paid for by the business, and 100% of the VAT can be reclaimed, if the office is used solely for business purposes. However, if there is some private use, the amount of VAT that could be reclaimed would need to be restricted.

It is therefore important to remember that if the garden office has any personal use, for instance as a guest room for visitors or even a place to sit at the weekend to read a book, then tax relief will be restricted.

Although many people install a garden office for the sole use of working from home, it can be extremely difficult to prove to HMRC that you do not ever intend to use the building for any personal matters.

If you intend to use the office for business only, it would be prudent to have an agreement between the company and you prohibiting any private use.

Is there a benefit? – Income tax considerations

If the garden office is to have some personal, use, there would be an annual taxable benefit in kind, which would need to be reported on the employee/director’s P11D.

If the office is to be used wholly for business purposes, there should be no such benefit in kind.

Moving house – capital gains tax considerations

Often, when you sell your home, any capital gain is exempt from CGT due to the availability of “main residence relief.”

However, where part of the house has been used solely for business purposes, such as a garden office, a proportion of the gain might then become subject to CGT as main residence relief would be restricted.

If there is some private use of the office, then main residence relief might then be due in full (although there are various conditions that need to be met for that relief to be available).

Clearly if there has been private use, this will affect the VAT and income tax treatment as detailed above.

Other considerations – business rates

Business rates may be assessed on the building if there is 100% business use – this should be checked with your relevant local authority.

If your local council decides that your garden office is subject to business rates, you may be able to reduce the cost by obtaining small company rates relief which can be used by properties with a rateable value of £15,000 or less. If the rateable value is £12,000 or less, there will be no business taxes to pay.

If there is some personal use, then business rates will not be applicable.

Get in touch

Building a garden office for business purposes, and paying for it through a limited company, may sound tempting, but it comes with its complexities.

If you would like to discuss the tax implications of installing a garden office, please get in touch with Wendy Anderson by clicking the button below.

Are you making the most of HMRC’s available reliefs and allowances?

HMRC have recently published a list of their available reliefs and allowances – are you utilising the financial support which is available? In our latest blog we highlight the tax savings you could be making.

Child Benefit

Child Benefit can be claimed if you’re responsible for raising a child who is:

  • under 16
  • under 20 if they stay in approved education/training

It is important to note that only one person can claim Child Benefit for a child. It is paid every 4 weeks, and there is no limit to how many children can be claimed for.

However, if you (or your partner’s) individual income is over £50,000, you may be taxed on the benefit, otherwise known as the ‘High Income Child Tax Benefit Charge’. Use the Child Benefit tax calculator by clicking here to determine how you may be affected.

Tax-free childcare

You can claim up to £500 every 3 months (up to £2,000 a year) for each of your children to help with the costs of childcare. If your child is disabled, this increases to up to £1,000 every 3 months (up to £4,000 a year).

Check your eligibility for tax-free childcare, including how to apply, by clicking here.

Income tax relief for your employment expenses

Claim income tax relief on money you’ve spent on things like work uniform and clothing, tools, business travel and business fees or subscriptions.

Marriage Allowance

Marriage Allowance allows you to transfer 10% (£1,260) of your personal tax allowance to your husband, wife, or civil partner if you earn less than the personal tax allowance (currently £12,570).

Help to Save

Help to Save is a type of savings account for those who are entitled to Working Tax Credit or are in receipt of Universal Credit. The Help to Save scheme gives a bonus of 50p for every £1 saved over 4 years.

Child Trust Funds

A Child Trust Fund is a long-term tax-free savings account for children born between 1 September 2002 and 2 January 2011. You can add up to £9,000 per year to an existing Child Trust Fund, and there is no tax to pay on the income or any profit it makes.

Payment of tax in instalments (Time to Pay)

If you are unable to pay your tax bill on time, contact HMRC as soon as possible, as you may be able to pay what you owe in instalments (sometimes called a Time to Pay arrangement), depending on your circumstances and what you can afford. Find out more by clicking here.

Get in touch

It is more important than ever to ensure you are making the most of your available reliefs and allowances, whilst they are still available. For a further discussion on any of the financial support mentioned above, or advice tailored to your specific circumstances, please get in touch by emailing or by calling 01254 67931.