Garden office tax implications

The purpose of this video is to give an overview of what happens if you decide to build a garden office at home.

Garden office

There is absolutely no problem building a home office. But if you think you can offset the costs against your business, you need to think again. Unfortunately, yes, this is going to be a bad news video for some people. But let’s crack on.

Tell me the bad news

We know at the moment that there are plenty of reasons why you might want to build a home office. It could be because you’re just expanding out of the house. It’s a brand new business you’re trying to build. Or it can be the fact that you would normally work in an office, but for specific reasons you’re not going to be able to this year. So you decide that you have had enough of working in the house. Let’s go and build one in the garden.

Capital Allowances

There are capital allowances for structures and buildings, et cetera. But an office in the garden, a home office, is not an allowable business expense and you cannot claim the building structures in land relief. This also means you cannot claim any of the groundworks you have to have in order to flatten the ground to build the office, any planning, architects fees, constructions costs, or decoration.

It would normally be available for companies that have the ability to build offices, but it is specifically excluded if it’s in private residential property or it’s an outbuilding for a private residential property. So unfortunately all those costs you have incurred in actually building the garden office are not allowable. However, you will be able to claim capital allowances on plant machinery, or for a better fitting for our industry, the fixtures and fittings element.

What you must do if the same company is building the outhouse, sounds good doesn’t it, building the garden office, then you need to get itemised bills of the spend because they have to be split between the building and the structure and the actual fitting out of that garden office.

Allowable costs

So, having given you the bad news that the actual big money spend on building the garden office is not an allowable cost. What actually is allowable? Well, it’s known as plant machinery, but that doesn’t really ring any bells with us in the arts entertainment industry. So we call them fixtures and fittings. So, furnishings that might go in, for example, the sofa you’ve got for clients to come and visit you. A desk to actually sit and do your work from. So you’ve got furnishing and fittings, computer, telecommunications, surveillance systems, and specific wiring to do with the business. So not general wiring to get electricity down to the garden office, but anything specific for the business. For example, an ISDN line for a voiceover artist.

Specifics for the entertainment industry

Well, that would be a specific bit of wiring. Burglar alarm systems count as an allowable cost. Then the things that are useful and specific to the business. So looking at a musician or an actor or a voiceover artist, it’s potentially things like the recording studio equipment, rehearsals kits, musical equipment, even to the point of, if you’re a cellist, a chair and the mat with a spike hole in it, that would be allowable as capital. Something that small might just go through as a revenue expense.

Recording booth equipment, if you’ve got a home set up and in the corner, you’ve actually got a specific recording booth. Soundproofing the whole office and cooling systems and lighting rigs that might need to go in it and a recent one, acoustic windows and frames. If you’re using it as a recording studio, you might have soundproofed all the walls, but the window is the area where some sound would escape from.

Business rates?

You can get acoustic windows and the frames to go around it in order to make it much more soundproof. Yes, it’s great that you can get all these fixtures and fittings allowable. But still not the cost of the building. There are things you need to be very wary of when it comes to building a garden office. There could be a possible business rates charge if used for business only. That’s a bit of a bummer because you pay council tax on your home and gardening, et cetera. But having a specific business premise in your home may make you qualify for business rates. But equally you might be able to claim the small business rate relief.

Possible tax implications

There might be a capital gains tax implication because it technically increases the value of your home, especially if it is built of brick, rather a much more temporary, we can take this down, will I call them posh sheds, but some of them are very, very posh, but some of them just look like sheds. So that type of temporary structure, you might be able to take away and it might not have any implication on capital gains tax. But that’s if it’s 100% business. Obviously if you have some private use in it, then that’s different.

You may have to get planning permission. Where I have found is that tree preservation orders might stop the ability to build a garden office. If it’s going to be within a certain amount of space between the protected tree and the building. Check into whether you have to get planning permission. Whether it is under a certain square meterage, then you possibly don’t. Or whether it’s going to come under permitted development.

There are many things you need to be aware of. I know you’re still probably reeling from the fact you can’t actually claim the build cost of the garden office. So any problems, please feel free to get in contact.

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