June 6th, 2017

Will I get any tax relief (as a sole trader) if I build an office in my garden ?

It is becoming more common for businesses to operate from home.  With this comes the need for space and one solution is to build a separate office to provide the office space needed.  I am often asked what the tax implications of doing this are.

Business Tax implications

Not all of the cost of a garden office will be claimable against your income.

This is because expenditure on buildings, structures and land do not qualify for capital allowances.  Capital allowances are the way you would obtain tax relief.

Capital allowances are available on plant and machinery and tax legislation provides a comprehensive list of that satisfy this definition.

What you can claim for is the plant within the structure or building and this is where it is important to ensure that you have your invoice itemised correctly prior to the work being completed.

Items that are likely to be within the building and qualify as plant and machinery are:

This list is not exhaustive so if there is anything you are unsure of please seek further advice.

It is important to ensure that your invoice itemises all such items.  It would be normal to get a draft invoice from a supplier and for a review to be undertaken prior to commencing with the project to ensure items of plant can be separately identified and their cost quantified.

VAT implications

A VAT registered business may claim VAT on the provision of the garden building. If there is any personal use of the building you would need to make an adjustment for the personal element.  If you are operating the flat rate scheme then only VAT on the provision of the capital good and not the service will be claimable and only if the invoice totals £2k or more.

Foundation work

 Any foundation work would not be claimable as that would be in relation to the building structure rather than claimable as plant and machinery.

Capital gains Tax

This is only a future issue on sale of your home if you are building a brick-type new build rather than a more ‘temporary structure’ more akin to a ‘posh’ shed.  our advice would be to speak with your tax advisor prior to construction,

Other considerations

As the garden office will be separate from your home there is a risk that local councils may seek to charge business rates – advice would be to check with your council.

Planning permission is also an issue that is best to discuss with your local planning department before undertaking work.

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Alison obtained a First class degree in Accountancy and Management at UCLAN University. She then went on to qualify as a certified accountant in 2006 and became a founder member in 2011.

Alison trained at a practice in Liverpool and, within her 10 years there, she developed as an accounts manager and obtained a varied portfolio of clients which has provided her with a range of experience in accounts, audit, VAT and taxation.
Alison specialises in giving sound jargon-free advice to a range of small and medium sized businesses.

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