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A Guide To Claiming Your Garden Office On Your Taxes

Working from home has increasingly become popular. To some, saving on commuter fees is fascinating.

While that may be the case, homes are getting filled with work files and documents, laptops, and other several electronic gadgets. The house often gets messy proving to not be a sustainable place for working in. Use of garden offices, as a result, has been the most preferable option.

Garden offices will offer you a workable space away from your noisy and messy house. Many questions though still linger about whether an individual can claim a garden office on your taxes.

It’s possible to claim your garden office on taxes, though it isn’t as straightforward as it seems. There are more issues such as tax reliefs, capital allowances, and VAT taxes that need to be considered first.

In this article, we will discuss whether a garden office is tax-deductible, whether you can claim a garden office, and whether you can rent a garden office. So read on to find out more.

backyard office
Heating in winter and cooling in summer is an important factor to consider

Is A Garden Office Tax Deductible? 

If at a certain time you have managed a business, then you are probably aware that many tax implications are involved.

Apart from VAT, it is not possible to deduct tax from your garden office. If the garden office is solely used for business, VAT incurred on the cost of furniture or cost of the garden structure itself can be reclaimed.

To support any claim, make sure that there are VAT invoices addressed to the business. You should work out a pro-rata personal and business usage of the garden office. When the office is exclusively used for business throughout the week and maybe for leisure at the weekends, you can claim 5/7 of the VAT.

There are scenarios where tax considerations will take place depending on how you view your garden office. In the case where you treat your garden office as a company asset, you are likely to receive a tax deduction on the items within your garden office. Items such as office furniture and fittings are tax-deductible!

You can also claim tax relief on the structural costs of your garden office. Running costs of your office such as electricity and water can also be claimed.

Most people consider treating their garden office as a private entity. If you are one, then you will still be needed to calculate the potential tax liabilities that may arise.

Some of the costs incurred in your home do not apply to deductions. They include:

  • Telephone expenses. Your home landline phone bills are considered to be a personal expense and so cannot be included in your garden office deductions. You can however deduct the cost if you have a second line that is particularly used for business.
  • Pool maintenance expenses. The costs of cleaning and maintaining a pool are considered to be unrelated to either the garden office or the home and hence you cannot deduct these costs.
  • Lawn maintenance expenses. The costs for landscaping your home lawn are not tax-deductible except if you regularly meet with business clients in your garden office.

Can I Claim For A Garden Office?

As mentioned earlier, it’s possible to claim for a garden office if linked with your limited company. This is possible if the company is VAT registered and the company is not using a Flat Rate VAT Scheme. Just like traditional offices, garden offices are normally referred to as structures which makes it more unlikely to be able to claim its tax relief.

You may have a claim for your garden office through capital allowances on any items in the office such as office desks and other equipment needed for office work purposes. The tax allowances allow you to claim some tax reliefs on your garden office.

If your garden office has proper insulation, has a WIFI connection, CCTV, or has electricity installed, it’s possible for your claim to capital allowances on these.

Running costs and repairs can equally be claimed as business expenses. Most of the time these claims on capital allowances are the full cost of the purchases done in a certain period and are done by way of Annual Investment Allowances (AIA). 

This is done subject to a cap i.e. temporarily increasing to a fixed amount at the end of the year and prorating it to be in line with your accounting period. Tax relief can also be claimed for revenue costs for running the garden office. This may include electricity bills for lighting and heating purposes and other general maintenance costs.  

If you are using a Flat Rate VAT Scheme, a claim on capital expenditure will be on goods worth over $2425 with no limitations to personal use of the garden office. The complication with this is that you can only claim on goods and not services provided. Buying a large timber shed and using it as an office counts as goods and therefore VAT can be claimed. However, finding a carpenter to construct the shed is considered a service thus VAT cannot be claimed.

You can claim your garden office deductions through two options:

  • The Regular Method. This method involves making the addition of all expenses for maintaining your garden office and multiplying the figure with the percentage of office space used for business. The only shortcoming with this method is when your business is structured as a corporation. Tax remittance firms consider shareholders to be employees of the company hence no advantage.
  • The Simplified Method. This method allows a deduction of a specified amount per square foot. For example, if the deduction is $6 per square foot, so with a garden office that occupies 50 square foot you will have a deduction of $300 (50 square feet x $6)

For you to claim the garden office deduction you must have income from your business. For example, during a difficult business period, you may make a net income that is less than your garden office deduction. You will not be able to claim for deduction as it would create a loss.

Sometimes, you may decide to use your garden office to carry out your business. It may range from using it as a playground for your children to it being used as a man cave. Notably, you will incur personal taxes in the event where you do this.

You may have pure intentions of using your garden office for office work only but it certainly will be difficult to prove to your tax regulation authority that you don’t use the office for private affairs. We would advise you to always be prepared to pay for the “benefits in tax”

Can I Rent My Garden Office For My Business?

Renting your garden office to your business is likely to be interpreted as running a business from a garden office. Yes, it’s possible to rent your garden office for your business. It’s possible by entering into a rental agreement so that your company pays for the garden office space. However, the rental income you receive will also be taxed.

 You should make a careful consideration on a case by case basis so that you are not left with a tax charge on capital gains when selling or renting. This happens when you are planning to sell your home although at the moment tax laws exempt you from having to pay capital gains on your principal residence.

The capital gains will be calculated based on the garden structure size and the size of the plot it sits on. For example, if the garden office takes up 3% of your land, you will have to pay 3% on the gain when the premises are sold.

Claiming that VAT back is something you should do as the benefit is usually fairly significant. Put in mind that it’s not a Flat rate registered if your business is service-oriented. You should also be mindful of the risks associated with business rates as they could erode the tax benefits.

To sum up, the matter of tax on garden offices is a hard topic for most people to navigate. Hopefully, this article has enlightened you on all you need to know with regard to this!