Yes, your company can potentially pay for a garden office in the UK which can be much more tax efficient than paying for it personally, but there are several important considerations and rules to bear in mind to make sure you don’t create any unexpected tax liabilities.
1. Business Use Requirement
- The garden office must be used exclusively or primarily for business purposes. If there is personal use, it could complicate tax relief claims or lead to additional tax liabilities.
2. Tax Deductibility
- Construction Costs: Typically, the construction costs of a garden office are not tax-deductible. Generally capital expenditure classed as ‘buildings’ do not qualify for capital allowances so there is no tax relief on those costs. Costs that are classed as ‘buildings’ are outlined here https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca22010. These can be summarised as anything that makes up the fabric of the building (walls, floors, ceilings, windows, etc.) but not things that are attached to or installed in the building. Things that are attached to or installed in the building could be anything from electrics to office furniture. Even if you don’t receive tax relief on the cost of the building itself, it is certainly far more tax efficient for the company to pay for it rather than extract the money from the company, pay tax on that, and then use the money left to pay for the garden office.
- Running Costs: Expenses related to running the office, such as electricity, internet, and maintenance, are usually allowable as tax-deductible expenses, provided they relate to business use and can be identified (so this might be difficult for electric for example).
3. VAT Considerations
- If your company is VAT-registered, you should be able to reclaim VAT on the cost of the garden office and its fittings, provided it is solely for business use. However, if there’s any personal use, the VAT reclaim might be restricted.
4. Personal Tax Implications
- If the office is used partly for personal use, there could be a benefit-in-kind charge for the director or employee using it.
- If the company owns the office and you sell your home in the future, part of the gain might be subject to Capital Gains Tax, as the office would not qualify for Private Residence Relief.
5. Ownership and Legal Considerations
- If the garden office is bought by the company it would be owned by the company. If the company owns it, it will remain a company asset. This could affect its treatment if you stop using the office for business or sell your property.
7. Planning Permission
- Depending on the size and location of the garden office, you may need to obtain planning permission. Ensure compliance with local planning regulations.
8. Professional Advice
- It’s highly recommended to consult with your accountant or tax advisor before proceeding, as the specifics of your situation (e.g., the nature of your business and the structure of your company) will determine the most tax-efficient approach.
If dealt with correctly having your company pay for your garden office can be a very tax efficient wayt of doing things. If you need advice on this or something similar please feel free to get in touch with us.
