Boat as office

[d000hg]

This sounds ridiculous, but to humour you...I hope to buy a garden office building at some point to work from. Whilst the purpose would be wholly and exclusively for business (any non business use would not be significant), when I looked into this before I seem to remember it wasn't worth buying through the company.

I can't remember the specifics but I'm sure when I spoke to my accountant about it he advised the simplest solution was to buy it myself and draw up a rental agreement with MyCo and charge it rent, equivalent to the cost of running it so there is no extra tax liability.

I have no idea if it being a boat rather than a semi-permanent structure would change this but come on...a boat? Who are you trying to kid?

Since the thread has been resurrected now... did I remember correctly you have in fact done this now, from a thread about mesh WiFi?

If all you are charging YourCo is rent for the running costs, it seems odd this is the best route. For a start if you buy/build it through YourCo as premises it's deductible which is akin to about 20% saving on the cost. And if you buy one of these fabricated "garden office" things the bulk of the cost is on a single purchase which would include ~£500-1000 VAT depending what you buy.

Maybe you already went into more detail in another thread or someone else did? I know there are CGT complications.
I'm considering doing something like this in the future and more relevantly, Mrs d000hg has serious interest in starting a business from home which would require a small extension or converting an out-building.

[TheCyclingProgrammer]

Since the thread has been resurrected now... did I remember correctly you have in fact done this now, from a thread about mesh WiFi?

Correct, I'm sitting in it right now.

If all you are charging YourCo is rent for the running costs, it seems odd this is the best route. For a start if you buy/build it through YourCo as premises it's deductible which is akin to about 20% saving on the cost. And if you buy one of these fabricated "garden office" things the bulk of the cost is on a single purchase which would include ~£500-1000 VAT depending what you buy.

Maybe you already went into more detail in another thread or someone else did? I know there are CGT complications.
I'm considering doing something like this in the future and more relevantly, Mrs d000hg has serious interest in starting a business from home which would require a small extension or converting an out-building.

TLDR; buying it through the company has only one practical financial advantage: the ability to recover the VAT. It's not a tax deductible expense and it doesn't quality for capital allowances so there's no corporation tax saving to be made on the cost of the structure.

Weighed against this is 1) the risk it has of impacting CGT residential relief when you sell your home (although depending on the relative size of the building to your home, this might not be a problem - a small proportion of any gain you make when you sell your home may be covered by your CGT allowance anyway) and 2) the potential for liability to a BIK. The second one was the thing that swung it for me. YourCo can provide assets at an employee's home even if there is personal use so long as the personal use is not significant, but there is a specific exclusion from this rule for buildings. Over a short period of time it's likely that any BIK charge would cancel out the VAT saving. And you'd still be faced with having to buy the building from YourCo if you want to sell your house in order to avoid further complications when selling your home (and you'd need to account for VAT on the sale).

So yes, I bit the bullet, paid myself some extra dividends and paid for the office myself. Cost about £14k in the end. As it is primarily used as an office and to run my business I was able to put pretty much all the fixtures and fittings through the business so long as they could be justified as wholly and exclusively for business purposes, which means pretty much anything you might find in a normal office. Desk, chair, a small sofa, a small coffee machine etc.

Building didn't require planning, even though it's primarily used for business purposes. Because it's just me, a desk and a laptop, I don't have employees or visitors, local planning department was satisfied that it fell within permitted development rights (which requires the use of such buildings to be incidental to the enjoyment of the main house). I have a lawful development certificate which cost £80. Also had written confirmation that business rates would not apply, so all the boxes ticked.

Right now I don't have a rental agreement in place, I'm still just claiming the £4/month for use of home. Last time I spoke with my accountant he was a bit more cautious about going down this route. I've found savings in other ways - I've had a Virgin business fibre line installed and it's a company account so it's paid for by the business. Even though we obviously make personal use of it, accountant was satisfied we could argue it's purpose was wholly and exclusively for business and that personal use was not significant due to the fact that I can't run my business without it. Electricity use is probably not too high. There's only so much you can justify claiming as an expense if you go down the rental route.

[d000hg]

Thanks for the detailed reply.

I'm curious about a couple of things...

1. Why is it not a tax deductible expense to provide premises for your business? If you rented office space in some business park or signed a lease it surely would be - what am I missing here? Is it specific to being your own property in the first place?
2. I'm a bit confused by the BIK angle. You're saying that running a business from your premises of any kind, you would personally be deemed to benefit from their offices? Or is this specific to being a 1-man company... say we had a 4 acre paddock and wanted to set up a stables which involved building some structures or whatever.

From my research IF you are deemed to require planning permission (a contractor as you say wouldn't) then they work out rateable value of the office space and you would face a bill - but there are exemptions under some threshold. Wouldn't that suggest the rental amount you could charge YourCo could be tied to the rateable value not some minimal figure?

We're going off on a tangent from your specific case so obviously you might not have researched such things in that area. Also - £14k ouch! Did you buy off the shelf?

[TheCyclingProgrammer]

1. Business premises rental is an expense and is tax deductible. A constructed building is an asset, not an expense. Capital assets aren’t tax deductible expenses, but you can often claim capital allowances. Capital allowances are not available for buildings.

2. There is no tax charge on assets provided at an employee’s home so long as it is for business purposes and any private usage is not significant. This rule is what allows us to purchase any equipment we need to work (such as laptops) and any other office furniture or equipment. See:

https://www.gov.uk/hmrc-internal-man...anual/eim21611

However note that buildings are explicitly exempted from this rule:

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

It is acceptable for a business to provide office accommodation on its own premises and I did consider the possibility that you could argue with HMRC that your home is also your company premises but on balance I decided that this argument would not wash. You might have a stronger case if YourCo exclusively rents the ground that the building sits on but I still think it would be a tough sell. I wasn’t willing to risk it.

As far as the rent you charge YourCo, you can charge anything up to a reasonable market rate but to do so would be pointless. Any rental income you receive would be taxable so if it exceeds what you can offset in terms of rental expenses you’ll end up paying tax at your marginal rate anyway. That’s why you work out what you can reasonably offset against the rental income and just charge that.

Yes my building was off the shelf. It was an Inspiration model from Green Retreats, 3x3m. Price included upgrade to red cedar cladding on the front and side (the hidden sides are just standard pressure treated redwood) and internal plastering upgrade.