Can I claim tax relief on my Garden Home Office?

[221b]

Hello Answerbankers

I had a garden building designed and built two years ago. It cost me �18,000.

I use it exclusively as my home office.

Can I claim this as a capital expense? And if so is it the entire cost of the building, or just a proportion?

Many thanks!

221b

[Rosetta]

Did you have Planning Permission?

[buildersmate]

Two issues that I know of.
Firstly you will incur Business Rates on it - this may not be a problem to you if you incur these anyway (which in turn will depend on what business activity you do there). But it would certainly prevent the other small-scale method of merely using one room in your dwelling.
Secondly, and probably more importantly, it will result in part of your domestic dwelling being subject to capital gains tax when you eventually sell the property.

[221b]

Hello Rosetta, thanks for your reply

Yes, I did have planning permission. And Listed Building consent and Conservation Area permission. It's a bit like that round here :-)

Thaks for your useful questions buildersmate.

I use it simply as an office and have all my paperwork, books, accounts, photographs, leaflets, CVs, old recordings, old plays, scripts, records of submissions I've made and general business bumph stored there.

I don't conduct my business there. I just store all the connected paraphernalia there.

I work outside of the office on someone else's premises as a rule, such as a recording studio, theatre, studio etc.

I currently claim 20% of my household expenses for use of home as office, but would like to know (as I mainly use the building for that purpose now, rather than the house) if it's a legitimate expense.

Many thanks for your answers so far, both of you.

Further gems much appreciated!

221b

[dot.hawkes]

I think you can claim for the materials and labour for building it and then claim 50% the next year and so on as the written down value i think it is. Buildwersmate will know, though that might just apply to machinary and equipment

[221b]

Thanks dot.hawkes!

I hope buildersmate sees this and comes back to me ;-)

Many thanks

221b

[buildersmate]

There are various capital allowance categories. See below. I can't see how your building fits into any of these. Energy efficiency perhaps? - you'd have to scrutinise it closely. What does your accountant say about this?
http://www.hmrc.gov.uk/capital_allowances/inve stmentschemes.htm

If you've been claiming 20% of household expenses against the business, then as far as I know you are going to find that your private residence relief from capital gains is going to be capped (presumably at 80% of any gain in the property value between the periods of time that you run the business using part of it for business purposes. More info here.
http://www.direct.gov.uk/en/MoneyTaxAndBenefit s/Taxes/TaxOnPropertyAndRentalIncome/DG_402089 0
Did your accountant not mention this?

[221b]

Hello buildersmate,

I don't have an accountant!

I do my own accounts.

I've always legitimately been able to claim a proportion of my household expenses as "home as office" running costs, so I estimate this as 20% which HMRC advised me last year was pretty standard.

I've read online about many people claiming the building of their garden home office as a legitimate expense, so I thought I'd check exactly how I'd go about doing that.

As a proportion of the value of my house, it is less than 10%. I can't see the garden building accruing much in value over the next few years, I just wondered if I could offset the original building costs against my tax due as a legitimate.

Thanks for the reference to the HMRC pages.

I shall read them with interest. I've been trying to ring my local tax office for over a week, but just hang on incessantly in a queue as I expect they're very busy at this time of year...

Many thanks for you continued advice!

221b

[buildersmate]

Oh it's legit. It's just that (I believe) it means that one runs the risk of the partial removal of private residence relief (if the proportion gets too large). I don't know what the guideline threshold is for a proportion of the residence used in this way.
HMRC won't warn you about this when they agree the sums. If it is just household bills and they are proportioned according to some reasonable formula like square footage ratio, I believe you are OK. If there is any sniff that your business is paying for something that may be construed as rent, that's different. Maybe others can confirm this or let me know this is wrong.

[Skyline D]

Have to say I think 20% is pretty high for a percentage of household costs to be allowed for tax purposes as 'use of home as office'. If they are allowing that at the moment that's pretty generous in my experience.

Can you claim for the building? I presume it's a permanent structure and couldn't be considered plant or equipment? If so then pretty much the answer is no. You can't get Industrial buildings allowances on an office premises and IBA is being phased out over the next two years anyway so it wouldn't be worth much to claim it anyway. If you could possibly claim it was moveable then you might manage to persuade the taxman that it would be entitled to plant allowances but from the description so far it seems unlikely.

dot.hawkes answer is nonsense. Ignore it. Buildermate presumably is right about both the consequences for business rates and the potential for a taxable capital gain on eventual sale of the property. I have no great expertise in either area.

[Skyline D]

Oh, and further to buildersmates suggestion that his private residence relief would be capped as a result of claiming 20% expenses for self employed office use.

No it wouldn't. You can claim expenses for using the home as an office without removing its qualification as a home. 20% is quite high though as I suggested in the previous post. I'd guess he's probably correct in that if you were to claim the separate building as a distinct office then it may have consequences in that direction.

[dasherman]

�18k for a store room !!!

[221b]

Thanks Skyline, for your informative replies.

20% was a figure that I was suggested by a tax advice line given the hours that I told them I spent using my home as office and percentage of it I use given the overall size of my house.

I understand some people's percentage is even higher depending on the proportion of one's house used/the hours spent in it conducting business.

Dasherman, I paid �18,000 for design & construction of the building.

I house my library, work related paraphernalia and all my craft/art materials in it due to lack of space in my home. It has heating and electricity, should I wish to use it for other/additional purposes at a later date.

I don't think I have to justify to you how much it cost and I don't see how your comment adds to my original question.

I thought this site was called "the answerbank", not "the sneery comment bank".

I believe there are all sorts of forums you can visit if you just want to have a go at someone...

[dasherman]

My edition of the Concise Oxford Dictionary defines opinion as 'what one thinks about a particular topic or question.' I was merely expressing mine.

I agree that it wasn't particularly constructive,but as far as I'm aware there's nothing in the answerbank rules that says contributors can't express their opinions. Infact many people actively ask for them.

You are perfectly entitled to spend your money however you see fit. But �18k does seem a lot of money to spend on a glorified shed that you say yourself you don't use very much.

[Skyline D]

It is an expensive store room but that's really 221b's business if he can afford it at the end of the day.

As for the 20% thing 221b I wasn't suggesting you were wrong, merely saying in my experience, and I've deal with a lot of such situations, I've never seen one as high as 20% but if you are genuinely using the place extensively for business purposes then that's fair enough. I'll be surprised if the revenue don't query it as some point. It's an obvious point of attack. What are you claiming 20% of incidentally? Heat & Light, telephone, council tax I expect? I presume this separate building doesn't get separate bills for all of these? If it does then potentially you should be claiming those expenses specifically and not a proportion of the overall total.