When it comes to tax relief on a garden office, it’s essential to understand the nuances of how it’s built and used. Generally, HMRC does not provide relief for structures within domestic settings, such as a home office located in a garden. Therefore, the cost of constructing the building or structure itself, like a pod, does not qualify for tax relief since it’s situated within your residential space.
However, there’s a silver lining…
While the building’s structure doesn’t qualify for relief, businesses can typically claim capital allowances on integral features like wiring and plumbing, as well as any necessary furniture or office equipment required for business purposes inside the garden office.
Moreover, if your business is VAT registered, there may be an opportunity to recover VAT on construction and installation costs. Yet, navigating the VAT treatment of construction expenses can be intricate and requires careful consideration based on the specific nature of the supply and its intended use. As a general guideline, VAT recovery applies to interior expenses rather than the exterior structure.
Regarding running costs like electricity and water, these are entirely claimable as legitimate business expenses. However, if you don’t have separate utility bills for the garden office, VAT recovery may not be possible. We advise against splitting bills, as it could lead to the garden office being deemed a ‘benefit in kind’ from the limited company, potentially triggering tax implications.
Lastly, separating the garden office from your home and exclusively claiming expenses through the limited company may complicate matters when selling your home. To sidestep this issue, refrain from seeking VAT recovery or tax relief on the building’s structure itself. Instead, focus on claiming expenses related to the office’s interior, such as office equipment, furnishings, and other essentials.
