Building an office at the bottom of the garden can create the perfect workspace solution for many of us. Whether it’s a shed, cabin or solid structure, that separate workspace can solve a raft of problems. With working from home becoming even more common and encouraged by some companies since COVID, then separating out workspace from home living can help with work–life balance and provide a quiet, private area for important calls and concentration.
According to the Office for National Statistics (ONS), in April 2020, 46.6% of people in employment did some work at home.* A report from Microsoft and YouGov in February 2021, said that in general workers in the UK are happier working from home. **
Whilst your garden-based home office might offer exactly what you need from a work perspective, it’s important to understand what it can and can’t give you from an accounting and tax standpoint, and it’s not as straightforward as you might think….
It’s important to understand the main points when it comes to claiming tax relief from your garden office structure.
- You can’t claim any tax relief on the structure itself, including planning, foundations and building
- You can claim tax relief on the furniture and equipment you put inside your office (in the same way you would if it were an office inside your home). This would be categorised as a capital allowance.
- You can also claim tax relief as a capital allowance on certain fixtures, fittings and services if they are required to make your structure suitable for your work. i.e. electrics, plumbing, insulation, etc. You can also claim for ongoing running costs too.
- You can claim the VAT back on the costs, but you will need to make adjustments if there is any personal use of the building. Invoices that you wish to claim would also need to be made out to your company and not to you in person.
- If you rent the space for any other business use you would need to pay tax on the rental income.
What happens when you sell your home?
Should you choose to sell your home, there are a few others tax related factors to consider…
- You may need to pay Capital Gains Tax (CGT) when you sell your property if your home office structure hasn’t been used for any personal use, so you might want to consider ‘various’ uses when designing your office space.
- The amount of CGT you could be liable to pay would be proportionate to the amount of land that your structure covers.
- Principal Private Residents (PPR) relief is exempt from CGT
At Ellacott Morris we can provide invaluable advice and support whether you’re considering creating an office in your garden, or whether you’re already working in this way. Our team of taxation experts are here to help you make the best decisions for your business.
Contact us today to find out more…
By Michelle Morris on 06/05/2021 12:00:00