Garden office

Garden office

Installing a cabin, shed or something similar in your garden for your business requires careful consideration. If the garden office is used personally, unless very minimal, there will be a personal tax implication. It can be challenging to prove no or minimal personal use to HMRC, so there is always a risk of incurring a benefit-in-kind charge.

Capital allowances & VAT

Capital allowances are not permitted on the initial construction which includes architect and any legal fees as well as the wood, bricks and concrete. Tax relief will only apply to the fixings, which includes electrical wiring and plumbing. Furnishings, such as desks, shelving and cabinets are also allowable for tax. Ensure all invoices are addressed to the company, with different items/services separated.

 

VAT may be reclaimable on both the building and internal fixings (depending on the VAT scheme you operate), but the building must not be used for domestic accommodation. For mixed business and non-business use, there would have to be an apportionment of the input VAT (if you are eligible to reclaim) - VAT notice 700 para 33 details this. Please note that HMRC are unlikely to agree that a building in your own garden has no personal use.

 

Upkeep

Provided the cabin is a wholly and exclusively business asset and not your garden shed, any upkeep/maintenance costs would be considered valid business expenses.

 

Business rates

Your local council could charge you rates for running your business from the cabin. If you are unsure, we suggest that you check with them.

 

Selling your home or closing the company

Providing the cabin qualifies as a wasting asset and is of negligible value at the point of sale, it should not be subject to Capital Gains Tax. If you close your company and the garden office still has value, you will have to repurchase it from your company. However, you may have to repay more than it costs if valuations rise, especially if the office is made of standard construction and built to last. VAT claimed on building the cabin will be due on sale. 

 

Conclusion

Purchasing a garden cabin through your company should be fine, provided its use is exclusively for business and not for domestic accommodation. However, you should be aware that there may be an objection from HMRC and a possible cabin inspection, especially if it throws up a VAT refund situation. They may suggest that its primary purpose is not for business which could become a protracted and expensive argument. Our tax investigation insurance will cover such eventualities. 

 

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