Shropshire is fast becoming one of the homeworking capitals of Britain, with more people than ever choosing to work for themselves or set up an office at home.
But the domestic distractions of trying to run a business in a family environment is persuading many people that the best option is to build an office at the bottom of the garden.
The question is: Can the cost of building a garden office be offset against tax, and if so, what is the most efficient way of doing it?
Tony Elliott, from Shropshire accountancy firm Dyke Yaxley, says: “Typically, a garden office will cost anywhere between £5,000 and £30,000, and won’t usually need planning permission.
“The good news is that tax relief can help to cover part of this cost – not only for the building itself, but also for heating, lighting, furniture and equipment to kit it out.
“Tax relief is allowed, whether it is you as an individual, or your company which is paying for the garden office. But the bad news is that the cost of the structure itself won’t immediately reduce your income tax bill, or your company’s corporation tax bill.
“Instead, it’s only taken into account when the building is sold.”
Tony, who is based at Dyke Yaxley’s Shrewsbury office, said: “The real key factor when it comes to deciding how best to account for a garden office is VAT.
“If your company is registered, it can reclaim VAT on the cost of the structure and equipment, whereas it isn’t allowed if you buy and own the assets yourself.
“So, if the total VAT inclusive cost of installing a garden office came to £18,000, and your company made the purchase, it could reclaim £3,000 VAT, even though the office was sited at your home address.
“And remember, if you have personally bought a garden office, or paid to convert a space in your home at any time in the last four years, it’s not too late to get the VAT back.
“Your company should reimburse you the cost, and in return you would need to provide it with the original invoices, which it can then claim on its next VAT return.”
Dyke Yaxley’s Senior Tax Planner, Tony Elliott
