Can I really get tax relief on my Man Cave?

Business owners who work from home may indeed get tax relief – but before you get too excited, I am not talking about a glorified shed with a pool table, bar and wide screen TV for the football – but a genuine purpose built home office.

With an increasing number of business owners working from home there often comes a point when the spare bedroom desk is outgrown by the business, but a rented office is too costly and not really warranted. The garden home office could be the compromise, although there are a number of factors to consider:

Make sure the costs are invoiced and paid through the company.

The structural costs of the office will not save corporation tax, however certain costs of the office will save corporation tax through capital allowances:

  • Office and computer equipment

  • Insulation

  • Heating and water systems

  • Air conditioning

  • Lighting

If your business is VAT registered then the VAT can be claimed back on the costs. However if the garden office is for both business and personal use, then the personal element will need to be adjusted for.

Please be aware the garden office may attract a benefit in kind charge and tax personally, as it may be difficult to argue the use of the garden office is strictly business only.

Another area to consider is potential capital gains tax upon the sale of the property. Typically the garden office will depreciate over its life and not hold much value. However if the structure is more permanent and bricks are involved then it could have CGT implications. Typically if you sell your main residence no capital gains tax is due. However if no personal disallowance was made during the life of the garden office it may be argued a proportion of the usual tax free gain should be allocated to the business and may attract CGT.

As can be seen there are both tax advantages, but also potential tax implications of the garden home office. If you would to discuss this in more detail please do not hesitate to contact us.

Article written by Dave Horn