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Reply to: AccountingWeb series on garden offices
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Previously on "AccountingWeb series on garden offices"
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Part 2 has been published, so the OP has been updated with the link
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Originally posted by Lance View PostI'm sure it's been done before, but what about paying for it personally and renting it to the business?
Therefore all the usual caveats and warnings about speaking to your accountant to see if its worth it and making sure you do it properly apply. The rent should not exceed market rate and in practice it should be lower - you'll need to declare the rent as income personally so you don't want it to exceed what you can reasonably offset in costs.
The alternative is to continue to claim £6/week working from home or try and calculate the actual additional costs incurred and only claiming those. It might not save as much but its simpler. I've chosen to stick to the £6/week because I cannot be bothered with the faff of a) working out my additional utility costs or b) setting up some kind of rental agreement.
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Originally posted by TheCyclingProgrammer View Post
In other words, there's a potential saving to be made on some of the VAT and also the income tax you would have paid if you paid for it out of your own post-tax earnings but when weighed up against the lack of corporation tax saving, the BIK charge and the complications when selling your house you are almost certainly better off paying for the building personally and then putting the cost for any equipment/office furniture you use to kit it out through the company and get some savings that way.
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Just a bit of feedback on the article, as somebody who has researched and been through all of this myself...
1. Planning. The article makes a good point that a garden office meeting permitted development rules is not a given and many garden office companies gloss over this, focussing on the fact that their buildings meet the size rules but not the "incidental" use rule. That being said, if all you're doing is putting a desk and a computer in it and working in it 9-5 on weekdays without any visitors or external employees then its very likely to meet permitted development. The caveat here is that different LAs can interpret the "incidental" rule in their own way so you should at least consider applying for a certificate of lawful development.
2. Business rates - again very unlikely to be liable to business rates in the case where you're just using it as a home office, but again you should check with your local valuation office and council.
The future parts of this article will likely cover the various implications of purchasing it through the business or not but I can give you the TLDR; now:
* Building cost will not be liable for corporation tax relief as capital allowances do not apply to building work.
* VAT may be reclaimable but may need to be apportioned if not used exclusively for business (see next point).
* Being owned by YourCo and used exclusively for business may increase the chances of it being evaluated for business rates and may also have CGT implications when you sell your home.
* Being owned by YourCo may also cause complications when selling your home as the office will probably need to be sold too (and you'll need to account for VAT on this sale).
* Because the building will be on your own property and you have access to use it at any time it will likely result in a BIK charge - there's no getting around this, the "not significant personal use" rule that normally applies to company assets provided at a director's home (e.g. laptops etc.) which normally protect us from BIK charges does not apply to buildings. A BIK would still be chargeable even if you could prove you never used it for personal reasons (think of this a bit like the rule that applies to company cars - merely having it available to you makes it a BIK).
In other words, there's a potential saving to be made on some of the VAT and also the income tax you would have paid if you paid for it out of your own post-tax earnings but when weighed up against the lack of corporation tax saving, the BIK charge and the complications when selling your house you are almost certainly better off paying for the building personally and then putting the cost for any equipment/office furniture you use to kit it out through the company and get some savings that way.
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AccountingWeb series on garden offices
Just spotted this, could be of use/interest to some
The series home page is here: The tax treatment of the garden office | AccountingWEB
Helen Thornley tackles the tax matters and other practical legal issues that may arise when a business operates from a pod building in the garden. It’s a big topic, so this is the first of a series of articles
The garden office part 2: Personal ownership | AccountingWEB
The garden office part 3: Business ownership | AccountingWEB
I'll update with links to the following articles in the series as they come up.Tags: None
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