Converting garage to an office - business expense?

[b0redom]

I'm shopping around for a garden office and have researched this to death and have finally decided to finance it personally and kit it out on the company.

The biggest saving to be made is on the VAT of course even in the flat rate scheme as long as you can get the invoice itemised as you can only reclaim the VAT on capital goods over £2k on the FRS, not any services like installation.

But there are complications - the building itself would be an asset and not an allowable expense for corporation tax. It also wouldn't qualify as plant and therefore capital allowances - I've seen a few accountants and garden office companies (I've looked at Booths myself) make this claim but simply being possible to move it does not make it plant, if it's clearly intended to be a permanent structure it's not plant. It would have to be something that is intended to be moved on a regular basis, like a portakabin for example. Seems like trying to pass it off as plant is a big risk to me. Don't get tax advice from garden office companies!

And then there's the BIK issue. The construction of any kind of structure at the main residential property of a company director is automatically treated as a BIK, even if the primary use is for business.

Do you have a reference for this? It would seem counter inntuative. If you take that to its logical conclusion, you couldn't allow any asset to be hosted at the director's home? Can't have an office chair because it might be used for non-business purposes etc.

And then there's the implications when you sell your house. There may be CGT implications. And if you aren't going to move the office, YourCo will need to sell the office to the purchaser of your house and it will need to charge VAT.

There's also a small risk with business rates. If you own it personally there is still a risk but I think there's an increased chance of it being liable if it's owned by the business (just speculation on my part).
It all just gets really messy.

Why would there be CGT if you took your office with you?

Booths for example claim they'd charge £5k to disassemble and move an office. Assuming the cost of buying one is ~ £21k, that means an assumed materials cost of £16k, and a potential saving of £3.2k of VAT alone if purchasing through the company. Obviously you'd need to get the numbers confirmed, but even if you treat it as an asset which can't be claimed against CT, that's still a mighty saving....

[TheCyclingProgrammer]

1. You don't need to take anything to its logical conclusion. This isn't about any asset, it's about buildings. It is possible for a employer to provide assets at its employee of directors home but there is a specific exclusion for buildings:

EIM21612 - Particular benefits: supplies and services provided other than on the employer's premises: excluded benefits

The only argument you could try and make against this is that your property IS your employer's premises but I can't see HMRC buying it.

2. CGT. If part of your home is used solely for business purposes your claim for PRR may be restricted. If you have a company owned building sitting on your land then you are effectively giving over part of your land to be permanently used for business as long as the building is standing.

Of course nothing here is definite and my accountant believes he could potentially argue the case for putting the whole lot through the business but that isn't a guarantee.

You need to weigh up the risks but getting it wrong could prove costly. Especially if you have to pay CGT on even a small proportion of any gain you make when you sell your house.

Personally, I believe this is one of those things that should be justifiably paid for by the company but tax and benefit legislation hasn't caught up with this modern way of working. It does seem absurd that you could rent an office and claim the whole against your tax bill but not build your own garden office.

Even if you are able to claim a proportion of the costs through the company without further BIK implications that would be worthwhile but you'd still have the issue of either moving it when you move or selling it separately.