Building an office in your garden?
What are the tax consequences of building a home office in your garden? What if I have a limited company and wish to incur the cost at company level? 

Can I use my limited company to pay for the construction costs? 

The building will be a structure for tax purposes rather than equipment and therefore design, delivery and build costs are not tax deductible. 
The office should be used solely for business purposes. If there is any private use this may be regarded as a taxable benefit in kind and a P11D reporting requirement may arise. 
The following can be claimed as a deduction (in full where these costs qualify for the annual investment allowance in the first year): 
Cost of furniture 
Certain fixtures such as shelves and systems 
Thermal insulation 
The cost of heating and lighting 
Supply of water if it separately metered from the main home 
The cost of redecoration 
Costs of repairs 
Cost of minor items like a kettle etc, cutlery etc for meetings or business use 
If the office itself is sold in the future, there will be no gain as the structure will have depreciated in value. If the entire plot is sold, the house and the land, then HMRC could argue that a portion of the land does not qualify for principle private residence relief “PPR” but this might not be an issue if the total gain is within the annual exempt amounts for capital gains tax purposes. 
However, the proceeds of sale will be largely due to the individual who is selling the property and a small amount due to the company, if the office is sold along with the land. 

Non-Limited company/Self-employed 

If you are self-employed and are going to be working from home for the foreseeable future, you may be considering constructing a home office as a private addition to your property. 
The considerations in relation to capital gains tax apply as above, and consideration must be made to the restriction of principle private residence relief on a future sale. 
If you are self-employed you can claim some of the costs of running the office from your taxable profits as listed above. The design, construction and delivery of the structure will not be deductible from your taxable profits. 

Questions or queries? 

Please do let us know if you have any questions or if you need any further help understanding the regulations. – please call us on 01932 564098 or message us here. 

Information correct at time of publication 

This article was produced in September 2021 – please always check with Fuller Spurling that information is current, up to date and applicable to your situation. 
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