Another garden office thread

**TheCyclingProgrammer** · 22 September 2016, 13:13

Originally posted by b0redom View Post

Hi All,
I've finally got around to commissioning a garden office from these guys:

Garden Rooms, Garden Studios & Garden Offices - Green Retreats

The total cost of purchase, build and finish is about £20k.

I understand that I can't claim that against capex (even though it is portable) as per an earlier thread.

Is there any reason I can't buy it through the company? Even if it's not deductible against profits, the VAT I can claim back alone is £4k.

Assuming I can't buy it through the company, and I finance it myself, am I able to claim more than the standard £18/month use of home as office allowance?

It will be exclusively used as an office building - for most of the last 3 years I've been wfh.

I've researched this on numerous occasions, I intend to get a garden office next year. In short:

* Assuming you're on the FRS, you can only claim back on capital goods over £2k. If you're paying for the office fully installed and there's no breakdown of goods and services on your invoice, you can't reclaim the VAT.

* If its on land you own, my interpretation of HMRC rules is that you would pay a BIK even if its wholly and exclusively for business purposes. There is a general rule that company assets provided other than on company premises (e.g. at a director's home) are fine so long as any personal use is "not significant" - this is the rule that lets us buy a company laptop but still use it for personal stuff so long as there was a business purpose for buying it. The problem is, the construction of any building is excluded from this rule, see:

https://www.gov.uk/hmrc-internal-man...anual/eim21612

You could possibly make the argument that your home *is* your business premises therefore this does not apply, but that seems like a risk to me that could leave you liable for quite a lot of BIK taxes.

* As you mention, it doesn't count as plant so you can't offset the cost against your CT bill under capital allowances, although you could reclaim for all fixtures and fittings, potentially.

* There's potential issues when you sell your house. Having a building owned by your business on your land means you've effectively given up part of your land for non-residential use so your right to residential relief on CGT might be partially restricted. Also, if you intend to sell the building with the house, you either need to buy it off YourCo first or there will be a separate transaction between your purchasers and YourCo for the office building (and you'd need to account for VAT on any sale).

* If owned by the business, could possibly increase the chance that it becomes liable for business rates (pure speculation on my part this one).

On balance, my opinion (and my accountant's) is that you're better off buying the building personally and forgoing the VAT saving as the other issues make it not worth it. You can still put furniture and equipment through the business and make a saving there.

In terms of what you can claim, you'd be best speaking to your accountant about going down the route of drawing up a rental agreement between you and YourCo for use of the office Mon-Fri during office hours. As usual you should charge an appropriate amount of rent that is equal to what you can offset against it in rental costs to ensure its tax neutral. You should be able to claim a proportion of your fixed costs this way (utilities, council tax, mortgage interest etc.) instead of just additional costs and also potentially interest on any loan you take to finance the building if you need one.

In all honesty, the main thing that put me off buying through the business is the BIK issue. Its not clear-cut but I'm not willing to risk it. If it wasn't for that, I'd be willing to take a chance on the other stuff and deal with the hassle of selling when the time comes.

Another garden office thread