Garden Office Tax Implications
Discussion
I'm at the stage where I'm ready to start building a garden office, which I was thinking of paying for through my Ltd Co. However before I went ahead, I thought I'd just run it by my accountant, unfortunately they basically come back and said no.
This has surprised my as a couple of other friends have already done this on advice from their accountants. My understanding is that although the building can't be put in as a tax deductible capital allowance, I can still pay for it through the company, just not get a reduction in corporation tax. How does this work exactly, i.e. how do I account for this in the bookkeeping? Even without corp tax relief I would think this is still preferable as I have funds in the company doing nothing and it means I don't have to pay for it out of personal post tax income.
I believe I also have the benefit of being able to claim some elements of the VAT from installation of utlity services, furniture and non permanent fittings.
I'm also under the impression that if it's a timber built construction I can I depreciate it down each year until it's totally written off or dismantle\move it if we move house. A brick built permanent structure could lead to CGT issues if we decide to sell the house in the future (not that we plan to) but even that doesn't worry too much.
Tbh I'm getting a bit fed up with the default no answer from my accountants and this will probably be the straw that broke the camels back and make me change to another firm but before I go back and tear them a new one, I'd just like to confirm that the above is correct?
This has surprised my as a couple of other friends have already done this on advice from their accountants. My understanding is that although the building can't be put in as a tax deductible capital allowance, I can still pay for it through the company, just not get a reduction in corporation tax. How does this work exactly, i.e. how do I account for this in the bookkeeping? Even without corp tax relief I would think this is still preferable as I have funds in the company doing nothing and it means I don't have to pay for it out of personal post tax income.
I believe I also have the benefit of being able to claim some elements of the VAT from installation of utlity services, furniture and non permanent fittings.
I'm also under the impression that if it's a timber built construction I can I depreciate it down each year until it's totally written off or dismantle\move it if we move house. A brick built permanent structure could lead to CGT issues if we decide to sell the house in the future (not that we plan to) but even that doesn't worry too much.
Tbh I'm getting a bit fed up with the default no answer from my accountants and this will probably be the straw that broke the camels back and make me change to another firm but before I go back and tear them a new one, I'd just like to confirm that the above is correct?
trickywoo said:
I'd be worried about possible council interest for business rates and also benefit in kind questions from HMRC, could you prove no personal usage at all?
Smallish garden offices on home premises don't attract Business Rates from my LA. I'd not been planning to use it for personal use, it will be kitted out as an office so no beds, sinks, TV's etc so personal use will be minimal if at all so BIK shouldn't be an issue. It will be timber built and so lifed which means it will depreciate rather than add value to the house so again no CGT issues if we sell the house. If it is an issue I can just knock it down or buy it off the company personally before I sell.I'm pretty happy with all these aspects tbh, it was the bit where my accountant flatly stated "no, don't buy your posh shed kit through the company" which seemed off to me as advice online and from friends who have done it would seem to suggest otherwise.
Generally, Capital Allowances can be claimed on specific items of capital expenditure. Most Capital Allowances relate to what HMRC refer to as "Plant and Machinery".
In some cases, a shed MIGHT be able to qualify as an item of Plant and Machinery e.g. being used as a structure to protect (say) a working item of plant such as a rotary saw.
If it is being used as a building, especially an office building, then it won't really be eligible for Capital Allowances as buildings do not attract much in the way of Capital Allowances.
You can claim Capital Allowances on what you put INTO the shed, such as office furniture and office equipment.
I don't see why you can't buy the shed through the company. You won't get any Capital Allowance on the basic costs of the shed - but you won't be taxed on it personally either as it is being acquired by the company for the company and has no personal use aspect to it.
In some cases, a shed MIGHT be able to qualify as an item of Plant and Machinery e.g. being used as a structure to protect (say) a working item of plant such as a rotary saw.
If it is being used as a building, especially an office building, then it won't really be eligible for Capital Allowances as buildings do not attract much in the way of Capital Allowances.
You can claim Capital Allowances on what you put INTO the shed, such as office furniture and office equipment.
I don't see why you can't buy the shed through the company. You won't get any Capital Allowance on the basic costs of the shed - but you won't be taxed on it personally either as it is being acquired by the company for the company and has no personal use aspect to it.
Eric Mc said:
but you won't be taxed on it personally either as it is being acquired by the company for the company and has no personal use aspect to it.
I'd think if HMRC wanted to they could argue an element of personal use (BIK) quite easily if its in the garden of your home. In other words I think it would be harder for you to prove 100% company use than HMRC to argue an element of personal use. Whether they would bother is another matter.Thanks Eric, that seems to confirm what I've been reading elsewhere and from friends. I was especially interested in your last point, the CA would have been a nice bonus of course but not essential and I still get some tax back from the internal fit out.
More importantly I'd just rather pay for a place I work out of surplus work funds rather than my own pocket, my accountant said that was a no which just didn't sound right to me. Really frustrating when you pay someone for professional advice that's wrong.
More importantly I'd just rather pay for a place I work out of surplus work funds rather than my own pocket, my accountant said that was a no which just didn't sound right to me. Really frustrating when you pay someone for professional advice that's wrong.
trickywoo said:
Eric Mc said:
but you won't be taxed on it personally either as it is being acquired by the company for the company and has no personal use aspect to it.
I'd think if HMRC wanted to they could argue an element of personal use (BIK) quite easily if its in the garden of your home. In other words I think it would be harder for you to prove 100% company use than HMRC to argue an element of personal use. Whether they would bother is another matter.They would ignore incidental use anyway.
Oddly enough I have just been looking at the Booths Garden Studio website & one of their FAQs indicated that a client had said because the office is relocatable/portable (which theirs are) then the cost could be claimed for. See question 60:
http://www.boothsgardenstudios.co.uk./faqs
http://www.boothsgardenstudios.co.uk./faqs
I've read similar but don't think that works to be honest. A portacabin etc can be claimed which is what I think the rule applies to but I think you'd have a tough time convincing HMRC a garden office is a portacabin. To be honest I'm not really looking to use it as a tax dodge, I just want to pay for a place to work with work money.
There are a myriad of tax cases in respect of what constitutes "Plant and Machinery" for Capital Allowances purposes.
Garage forecourt canopies and wood panels in pubs have all successfully been decided to be "Plant and Machinery".
Portacabins might very well be allowed as "Plant and Machinery" DEPENDING ON HOW THEY ARE BEING USED IN THE BUSINESS.
Garage forecourt canopies and wood panels in pubs have all successfully been decided to be "Plant and Machinery".
Portacabins might very well be allowed as "Plant and Machinery" DEPENDING ON HOW THEY ARE BEING USED IN THE BUSINESS.
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