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Building an office in the garden

I am self employed and I was thinking about building an office in the garden, so that I have some peace and quiet away from the family whilst I’m working. What is the position with regards to offsetting the costs against the profits of my business?

Please note, this answer assumes you are trading as a sole trader or partnership. The treatment would be different for limited companies.

Constructing an office or converting an existing space for use as an office is capital in nature. Therefore tax relief is really only available via capital allowances on any “integral features”, fixtures and equipment.

“Integral feature” includes things like:

  • Electrical system (including lighting)
  • Cold water system
  • Space/ water heating system, powered ventilation system, air cooling/ purification and any floor/ ceiling comprised in such systems
  • External solar shading

Where capital allowances are available, you should also consider whether any private use adjustment is necessary. A balancing adjustment would arise in the event the business ceases or you sell the house. It is only at that point that the capital cost of the building itself could then be deducted.

If you’re VAT-registered, VAT should be recoverable. If the construction leaves the business due to cessation, sale of the property or the business deregisters for VAT, there may be VAT to repay based on what you’d expect to pay for the construction in its present condition.

This can be a complicated area so if you’re looking to spend significant amounts of money, please seek professional advice to ensure you’re getting as much tax relief as possible whilst staying within the rules. Your local TaxAssist Accountant would be happy to discuss this further with you. 

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