Office building in garden - VAT treatment

Office building in garden - VAT treatment

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Purpose built office building in garden. Inspector has disallowed VAT. Is this right?

Client co has suffered VAT on footings, prefab building and erection costs, not to mention the wiring up etc. It seems unreasonable for Hector to say that the VAT is not reclaimable. The building is paid for by the ltd company and shown on its balance sheet.

Any help would be most welcome.

Phil Rees

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By AnonymousUser
01st Oct 2007 17:44

Rental Income
I have a client who has done the same and built a workshop in his garden. Not sure what happened about the VAT as before my time.

We were claiming use of home as office in Ltd co accounts but after PAYE investigation have now agreed to treat amounts paid to directors (H & W) as rental income.

Have produced simple licence to occupy land for agreement.

Am able to claim not only share of mortgage interest but also share of rates, gas electric as well. Apportionments made on square footage of area used compared to whole house - less deduction for evenings/night.

As licence also covers rooms in house and garage company is limited to time it can use said premises so that there is no CGT problem in future.

I know this is somewhat off point but hope it helps.

I also agree with first posting.

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By User deleted
27th Sep 2007 06:41

yes you should be able to claim this
I have a client who is a sole trader who has done this. I have confirmed with the VAT call centre that the vat can be re-claimed. Client has reduced the vat claim for the non-business use element of the building.

Client also had a long discussion with council about impact on council tax / business rates but kept these to a minimum as a result of hours building was in use and visits by clients being minimal.

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By Simon Newark
25th Sep 2007 17:14

HMRC trying it on.
Yes, of course the VAT is reclamable, subject to the normal rules. The Officer is an idiot, or tying to rip your client off. From what you have said, the costs are incurred by the company, invoiced to the company and are for the purposes of the company's business. Before you go back to HMRC file a Trib 1 to protect your client's costs.

I suspect that the Officer is trying to argue that the office building is put up by the householder and then let to the company. Ok, so what. The householder can register for VAT in his own right, opt to tax and get the VAT back that way.

By the way, don't forget that the company should be paying rent to the householder as well for use of the land under some form of full repairing status to give the company the right to build on the land.

Finally, just out of interest, are there any planning restrictions on the garden being used in this way? Could scupper things if there are.

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By User deleted
26th Sep 2007 08:52

Rental income from home office
Further to Simon's comment below, presumably an element of mortgage interest could then be offset against this personal income from company? How do you determine an acceptable (and acceptable to who?) rental figure? Have recently set up small incorporated practice from home by converting garage into office and had not considered this aspect.

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