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Due to Covid-19 restrictions huge numbers of people are routinely working from home. Many have come to realise that sitting at your kitchen table is far from ideal. It can also be difficult to concentrate perched on the sofa with your laptop. Especially if children are trying to do schoolwork online. A dedicated outbuilding could be the answer, but can you have your limited company pay for a garden office?

The pandemic is prompting people to think long and hard about their workspace. Self-employed people and SMEs are re-evaluating their set up. Others will decide that 2021 is the year they start a new business.

New businesses

For start-up businesses, operating from home keeps costs down. It’s a big bonus. Although, again, it can be tricky to draw a line. Where does home life end and business activity begin?

Having a limited company pay for a garden office

For this reason, many will be weighing up the pros and cons of decamping to their green space. An office in the garden can be as straightforward as a modular posh shed or a bespoke custom-build with the most advanced materials and technology. Prices range from as little as a few thousand to upwards of £30,000.

Whilst you can have your limited company pay for a garden office, it’s important to consider the tax implications. You can charge the costs to your business, but what is the best approach? What sort of tax relief will you be entitled to on the cost of the build and its running costs?


Business and private use

There are two options. Planning to use your garden office solely for business purposes? This is straightforward. You can put the set-up costs through your company accounts. However, things can get complicated where private use is concerned. To HM Revenue & Customs this is a benefit in kind, and you must declare it on your tax return.


Company asset

If you have your limited company pay for a garden office, your garden office becomes a company asset. It’s therefore vital to think ahead. What happens if you decide to move house? You must provide compensation by purchasing the garden office from your business.


Capital allowances

Be aware you cannot offset the cost of the building against corporation tax. Consequently, all planning, building and installation costs are your personal responsibility. However, you can claim capital allowances for furniture, equipment and electricity connection. You’re also permitted to claim ongoing running costs and repairs as expenses.


Private ownership

Alternatively, you could own the garden office privately. This way it is considered part of your house. In such circumstances you may charge your company rent. That said, what happens if you benefit personally from this arrangement? Any profit is subject to income tax. To avoid a tax liability, base the rent on a share of relevant household costs.


What are the VAT benefits of having my limited company pay for a garden office?

If you are VAT registered you can pay for the purchase price of the outbuilding and its contents, including running costs, and claim back the VAT on the cost. However, be aware that it is more complicated if you are on the VAT flat rate scheme. Please contact us for details.


Seek advice from your accountant

A garden office may prove the ideal solution for a wide range of businesses. It may also suit employees who will work from home more in the future. We have covered some of the considerations to think about. However, given the complexities involved in having your limited company pay for a garden office, it pays to seek advice.


To discuss your requirements, call us on 01785 243276.


More tax-related information

More info on garden offices.

Read more about reducing your taxable benefits.