The tax treatment of building a garden home office

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As more workers have been able to work from home during the pandemic, the team at Ellis & Co are regularly asked whether it is possible for a client’s limited company to pay for the building of a garden office. This is a surprisingly complex area with hidden tax consequences.

Any personal use of such a home office could be treated as a ‘benefit-in-kind’ and a tax charge may be raised on the individual using the office.

There may also be capital gains tax issues if the house and home office are later sold. If the office had been used for business purposes then this portion of the property may no longer qualify for ‘principal private residence relief’ (PPR) and would no longer be tax-free.

VAT could potentially be claimable on the purchase of the home office by a VAT registered company, but there would be no deduction for corporation tax as the office would be considered a ‘structure’.

There are additional issues to consider in relation to council tax, utilities and planning permission.

Before buying a home office, please call Ellis & Co’s tax specialist Melanie Tomkins to discuss the tax pitfalls above.