Home office

[Bob-iylho]

If I have a home office built in my garden, what is the best way of putting it through a business.
The problem I see is if the business pays for it then it is a company fixed asset.
Therefore if I sell the house I have to buy back the asset.
It's a big office, 50sqm with a bathroom and kitchenette.

I'm sure their must be a better way.

[Simpo Two]

How about you own the office but your company rents it from you?

[Bob-iylho]

Simpo Two said:

How about you own the office but your company rents it from you?

Not sure that would work, as it's additional personal income taxed heavily. Much like if I just recieved additional paid (dividend) directly. However I have got further in life than I should have relative to inteligence, so you may be right, I'll have a ponder on that front.

[Simpo Two]

Bob-iylho said:

Not sure that would work, as it's additional personal income taxed heavily. Much like if I just recieved additional paid (dividend) directly. However I have got further in life than I should have relative to inteligence, so you may be right, I'll have a ponder on that front.

It's how the two directors of a company I used to work for managed to hoover more money out. They had a personal joint mortgage on the building and let it to their company - but that was in the 80s so maybe it won't work now.

I guess you have to run the numbers and pick the most advantageous way.

I like the idea of a graph of Dosh vs Intelligence

[trickywoo]

You can end up with a real mess of capital gains to sort out when / if you sell and also run the risk of getting assessed for business rates.

It’s not worth it. I’m in a similar situation albeit on a smaller scale and two separate accountants have advised me to only claim £18 a month for running costs. You can claim a few £ more but the £18 is comfortably under the radar, I’m told, that HMRC won’t bat an eyelid.

[LimJim]

On renting to yourself, would you need to pay personal tax on the rent?


ps you can claim much more than £18 I think. No radar involved.

Edited by LimJim on Monday 14th December 11:15

[Bob-iylho]

LimJim said:

On renting to yourself, would you need to personal tax on the rent?

All questions, not answers!

Yes I think so because it money (Bob) earns, paid by a company (Bob Ltd). 2 seperate entities.

[trickywoo]

LimJim said:

ps you can claim much more than £18 I think. No radar involved.

Two different chartered accountants have told me otherwise so I would be interested to hear what you think is allowable and proves to be a net benefit.

Renting it isn’t an option as you save the 19% corp tax but pay more on income tax.

[LimJim]

trickywoo said:

Two different chartered accountants have told me otherwise so I would be interested to hear what you think is allowable and proves to be a net benefit.

Renting it isn’t an option as you save the 19% corp tax but pay more on income tax.

I put anything that is a genuine home office expense through the business. Office furniture, stationary, electricity. I should probably charge rent too but that's about the line when it starts to become complicated.

Edited by LimJim on Monday 14th December 11:16

[trickywoo]

LimJim said:

I put anything that is a genuine home office expense through the business. Office furniture, stationary, electricity. I should probably charge rent too but that's about the line when it starts to become complicated.

It's about the only expense the business has, and tiny percentage of profits. HMRC would be mad to kick up a fuss and to their credit, they don't.

Yes of course anything business related is fine, computers, printers whatever but costs of the building itself are much more problematic. The £18 a month (or £26 if you go top end) is all you are allowed for running costs. Heat, light etc. It’s a bit different if you are PAYE and required to work at home but for a director / company owner you can’t claim very much for the building itself at home, even in the garden, without getting into onerous capital gain calculations when you come to sell.

[LimJim]

Got you , thanks, my error.

Watching this thread with interest as thinking of doing similar, if the sums work.

[48k]

I am not an accountant but I would guess anything other than arranging the planning permission, paying for the materials, building costs etc,personally would get quite complicated both in the short term and if you ever come to sell the property. Best thing to do is speak to your accountant.

[Eric Mc]

Some of my clients have gone down the garden office route. It's counted as a fixed asset and will be treated as plant and machinery by HMRC.

Therefore -

the business can pay for it directly (or through finance)

if the business is VAT registered, it can reclaim the VAT

the business can claim Capital Allowances in its business tax calculations

From a local authority point of view, most councils will look on this as a garden structure, such as a shed so there would not be any planning issues.
There COULD be an issue regarding running a business from home without planning authority but that is not a given. You would need to check with your local authority to find out their attitude on such matters. These can vary from one authority to another.

From a Capital Gains Tax point of view, such a structure should not create any problems when selling your home.

[Eric Mc]

If the shed/garden office was purchased and owned by the business, whether it is a personal asset or NOT a personal asset depends on how you have set up the business.

If the business is being run through a limited company, and the asset was purchased by the limited company, then the asset is completely separate from your personal assets and any subsequent sale of that asset will not bring about any personal tax liability (whether Income Tax or Capital Gains Tax).
Obviously, depending on the amount received for the disposal of the asset, the LIMITED COMPANY might have a Corporation Tax liability arising.

If you run the business as a sole tradership, then business assets ARE personal assets and may be subject to personal Income Tax and/or Capital Gains Tax if disposed of.

[Bob-iylho]

Just a few points:

I need planning for it as it's a conservation area and too big for PD.
There is no way I could sell the house and the business retains the office (to close to house).
This is a big building 12m x 5m x 3m High.

[Eric Mc]

Bob-iylho said:

Just a few points:

I need planning for it as it's a conservation area and too big for PD.
There is no way I could sell the house and the business retains the office (to close to house).
This is a big building 12m x 5m x 3m High.

PD?

I don't understand your next sentence either. What are you trying to say?

Is this proposed building -

a) bricks and mortar
b) a temporary structure (made of wood or metal sitting on a base)
c) attached to the main residence in any way - or not?

[Eric Mc]

LimJim said:

Lets use numbers?

Say my house is worth 300k today I own it outright.
I build a garden office, and put all costs and expenses through a 1 person vat regged ltd company.
It costs 30k to build. Probably needs planning due to proximity to neighbour. But nothing complicated.
I use the office for a couple of years, and it only shows up in subsequent accounts via electricity and running costs.

I sell the house for 350k to a family with office intact.

1. is this the most tax efficient way to do it?
2. How does the sale of the house impact company accounts, given office is still on the asset sheet?

Sorry for hijacking. Im guessing OP would ask similar, but apologies in advance if not.

First of all, you cannot legally say "I sell the house and office". "You" cannot sell the office because it is not yours. Your limited company sells the office. The sale of the office has nothing whatsoever to do with the sale of your, personally owned, family home.

[Louis Balfour]

Eric Mc said:

PD?

I don't understand your next sentence either. What are you trying to say?

Is this proposed building -

a) bricks and mortar
b) a temporary structure (made of wood or metal sitting on a base)
c) attached to the main residence in any way - or not?

PD = Permitted Development

I think he is trying to say that it would not be possible for the property to be sold and a business retain the structure.

[Eric Mc]

So, it's not a "temporary" structure that could be relocated if necessary?

[Simpo Two]

Eric Mc said:

If you run the business as a sole tradership, then business assets ARE personal assets and may be subject to personal Income Tax and/or Capital Gains Tax if disposed of.

Though a second-hand garden office with moss on the roof would be worth a fraction of a new one, so a capital loss...