Thinking of investing in a home office?

With home working likely to be more common than ever, could your business invest in a garden office? This guide takes a broad look at the main points when deciding whether or not your business should fund the project.

The first and main point is that whilst your business can pay for the purchase or build of the main structure, this would not be tax deductible. This applies even if it is a temporary structure like a summer house or portacabin and also excludes any design or planning costs.  All is not lost though, because the VAT can still be reclaimed (if your business is VAT registered) and this alone could be a sizeable saving.

What is tax deductible are any fixtures and fittings and any costs involved in supplying utilities to the office. This is all likely to be a sizeable part of the overall cost and again could make it worthwhile for your business to pay for these expenses.

There are however some other things to think about when making this decision. The two main areas are Benefit in Kind (BIK) and Capital Gains Tax (CGT) which should be given careful consideration.

If the garden office is to be used solely for business then this could trigger a CGT bill when selling your house. This would be based on the percentage of your plot and so size really does matter. If you have a large garden then you are much less likely to be affected by CGT than if you have a small garden, even though you might have exactly the same garden office, costing the same amount. Many people miss this point during the decision-making process.

For most people though, it is likely that any gain would fall below the annual allowance. Therefore this would not trigger a tax bill, but it is always best to seek advice from a professional before determining the best way to proceed.

If however the office is sometimes used personally, this would trigger a taxable Benefit In Kind based on the percentage of time used for non-business activities. HMRC take the view that most home offices would have some percentage of personal use. It is worth noting that depending on the decision taken here, only one type of tax would come into play and so you should consider whether you will allow your family to use the space or not – It could be beneficial.

As you can see, there are multiple things to consider and here at The SMART Business Hub, help is always at hand. Please get in touch if we can be of any assistance.