Can my limited company pay for my garden office?

by Gavin Hooker

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The past year has seen a huge increase in the number of people choosing to and being able to work from home due to COVID-19.

Being able to create the right work environment is important and for some this is easy, and they are happy working from the kitchen table or the spare bedroom.

For others there needs to be a clear divide between work time and family time. This is where having a separate workspace away from your home can be a massive benefit for your productivity and well-being.

A garden office is a great option if you have an outside space!

A garden office could be as simple as an ordinary shed costing a few hundred pounds fitted out with a few extra comforts – lighting, heating and insulation, to a purpose-built garden office costing more than £20,000.

The good news is that you can get your limited company to pay for the cost of your garden office, but you need to be fully aware of the tax consequences of doing this.

The office is considered a structure for tax purposes, so while the cost of the building and installation is not tax deductible the company can still pay for it. This can still be tax efficient for you as the alternative would be for you to pay for the office out of your own after-tax income.

Are there tax benefits to getting my limited company to pay for my garden office?

While you don’t get tax relief on the cost of the office build and installation you can get tax relief on the cost of fixtures and fittings – electrics, plumbing, insulation, furniture, carpets, lights, blinds.

You can also claim for ongoing costs such as electric, water, repairs and maintenance.

If your limited company is VAT registered, then you can claim back the VAT on the cost of the building and installation of the garden office and on the fixtures and fittings.

However, there may be restrictions to what you can claim if your company is either on the flat rate VAT scheme or on a partial exemption scheme.

Can I use the garden office for non-business purposes?

You can use the garden office as a space for children to play in, to watch films, read books etc; but there may be a tax charge that needs to be reported to HMRC for this personal use.

Will I have to pay Capital Gains Tax when I sell my house?

If you use your home or part of your home, and that includes a garden office for partial business use (i.e. not 100% exclusive business use) then you will not have to pay Capital Gains Tax (CGT).

If you use your garden office for 100% business purposes, then you may have to pay Capital Gains Tax on part of the profit made on selling your house.

However, don’t let this put you off getting a garden office, especially if you aren’t planning on selling your home any time soon.

The Capital Gains Tax charge would usually be limited to a percentage of the overall profit on the sale of your home based on the amount of your property the office occupies. So, 5% space means 5% of the gain. And it is likely that the profit will be covered by your annual capital gains tax allowance.

If you are interested in finding out more about how you can get your limited company to pay for your garden office, please get in touch.

The content in this blog is correct as at 13 July 2021.