Is the garden office the new office?

3 November 2020

COVID’s here to stay, that’s for sure, as we unwillingly accept another lockdown on Thursday 5th November. We’ve been through it once, and we’ll get through it again. Whether you’ve returned to work, or are still working from home, we’ve all become creative with how we work. With make shift desks built, and spare bedrooms transformed into swanky offices, some people have even been looking at how to escape the noises of the family home by setting up home offices or ‘garden offices’. However, these great home innovations come at a price.

The tax considerations

A business could purchase a garden office, but the cost of the structure’s unlikely to qualify for tax relief, although associated costs such as wiring may qualify for capital allowances.

If the garden office is used exclusively for business use, there would be no taxable benefit in kind. However it’s unlikely HMRC will accept that there’s no personal use which would then give rise to a benefit in kind for using the office in a personal capacity.

However, if the office is used exclusively for business, then it would impact the Capital Gains Tax you pay on the disposal of your main residence. Ordinarily, you’d expect the sale of your home to be Capital Gains Tax free but if there’s a room used exclusively for business then HMRC would expect a percentage of the proceeds to be chargeable to tax.

If you’re registered for VAT, you can claim this back on purchase and associated costs, but not if you’re under the ‘flat rate’ scheme.

You’ll also need to consider whether planning permission’s required and business rates may also then be payable.

So, as we enter into another period of lockdown, make sure that if you’re creating or are intending to create a new work space, seek advice to ensure these home improvements won’t affect your tax position.