Bought home office through company, bad advice?

I'm hoping my accountant's advice hasn't cost me £6,000, any help welcomed!

Didn't find your answer?

I'm based in the UK, and could do with a little advice! Sorry about the long post, I'm feeling very stressed and upset by the whole situation. Thank you in advance for reading!

I'm with a high-street chain of accountants. I recently moved home and swapped to another branch of the same chain. My new accountant told me I should buy my new home office (garden shed type thing) through the company, as it's a moveable structure. He told me to get this in writing from the company to make sure, which I did. They confirm in their letter that it's moveable, and will be dismantled and taken with me should I ever move home.

The purchase of this home office fell in my previous company year, so my old accountant did those accounts. (This high-street chain take payment monthly, so I'd already paid them for the work, before they'd done it. Otherwise I would have asked my new accountant to do this set of accounts.) Unfortunately, my old account disagreed with my new accountant's assessment, and refuses to put the home office through as an expense. He's given me three options:

  • Declare it as a loan and pay it back

  • Declare it as a dividend

  • Adjust the loan against a dividend

Before my new accountant mentioned expensing it (something I hadn't even considered, and he brought up unprompted), I had the money in my personal account to pay for the office. I've since put that money into my mortgage, because I thought that was financially sensible(!).

Which accountant is correct? Has my new accountant essentially cost me £6,000 in dividend tax? And if so, is he at all liable for his bad(?) advice, or do I just have to take the hit?

Replies (31)

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By Paul Crowley
11th Mar 2024 12:30

There are some good articles on here about the garden pod
Get your new accountant to do the old accounts if you think he is correct
Blaming new accountant for paying your tax money into your mortgage is a daft position to take.
What have you lost in money terms. Nothing.
Passing the blame around really is not the issue.
Do you trust old accountant or new accountant advice? They cannot both be correct, but you appear to blame new man and want compensation?

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Replying to Paul Crowley:
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By accounthelp987
11th Mar 2024 12:51

Gosh no I don't blame anyone (yet). If anything I've learned a lesson about not trusting the opinion of one person, and researching it more myself.

But surely they can't both be correct. Either it's an allowable expense, or it's not. And my old accountant is SO adamant that it's not, which is why I'm leaning towards believing them more. Unfortunately the damage has already been done.

As for what I've lost in monetary terms, unless I'm mistaken it's around £6,000. (If I'm being daft or misunderstood something, it'll be music to my ears so do let me know!)

I had £17k in my personal account, ready to pay for the home office. New accountant then told me I could expense it, so I bought it using company funds. That £17k went into my mortgage.

It now looks like I need to draw £17k as a dividend to cover that cost? That'll tip me over into the next tax bracket (every year I purposefully stay below the 33% bracket). So I have to pay dividend tax on £17k, or just shy of £6,000. Whereas if I'd just paid for the office with my personal funds, there would have been no extra charge.

Again, if I've misunderstood somehow please do let me know!

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Replying to accounthelp987:
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By Bobbo
11th Mar 2024 13:09

accounthelp987 wrote:

I had £17k in my personal account, ready to pay for the home office. New accountant then told me I could expense it, so I bought it using company funds.

Who bought the home office, you or the company? I.e to whom is the invoice from the supplier made out to, 'Joe Bloggs' or 'Bloggs Limited'?

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Replying to Bobbo:
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By accounthelp987
11th Mar 2024 13:21

Thanks for the replies all!

The invoice is made out to a person, not my company. My wife originally paid £10k of the total amount to the company, and the invoice is addressed to her.

My new accountant advised that my company could reimburse her the £10k, then pay the remaining £7k directly to the company.

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Replying to accounthelp987:
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By Paul Crowley
11th Mar 2024 13:12

A lot of facts are needed together with an opinion.

https://www.accountingweb.co.uk/tax/personal-tax/the-garden-office-part-...

I did tell about this series of articles. Note she did not just say yes or no.
Read the full series
How did I find it?
google: accountingweb garden pod

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By More unearned luck
11th Mar 2024 13:23

What seems to be going on here is that one accountant sees the structure as a fitting and the other as a fixture. How full a description did you give the accountants? The same description?

Is the structure truly portable? How big is it? What foundations does it have? What services are connected to it?

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Replying to More unearned luck:
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By accounthelp987
11th Mar 2024 13:34

Hi :) I gave them both the same description, yes.

It's portable in the sense that it WILL be moving with us, if we ever move house. It can't be picked up and put on the back of a truck, but it's made of wood and will be disassembled, then reassembled at (the hypothetical) new property. I'm not sure if that counts as portable in the accounting sense, so was trusting my accountant tbh.

It's 3m x 3m, is connected to electricity, and has my laptop and a desk in it. I'm not sure about the foundations, sorry!

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Replying to accounthelp987:
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By DKB-Sheffield
11th Mar 2024 14:59

It doesn't sound very 'portable' to me (if moving it requires complete deconstruction?). With an electric supply (I'm assuming this is not a simple extension reel), it sounds quite permanent. However, the foundations may (or may not) prove to be highly pertinent... I assume that if you don't know, neither accountant would know, but it's the kind of thing I would want/ need to know before advising.

Incidentally, having been given two VERY DIFFERENT pieces of advice, why have you left it 'til this stage (post 'build') before questionning the outcome? On receiving a completely contrasting recommendation... did you not question the reasons 'why' the two accountants are on very different pages? Both may have very valid explanations - and both may have risks. Or, did you just 'go with' the accountant who gave you the answer you wanted to hear?

There can be reasons for advice to vary marginally, but a complete 'about turn' is rare - without being able to provide (and rely on) detailed justification either way. I assume you have all of this in writing?!

I have no idea (nor do I wish to know) the reason for 'leaving' the old accountant (is it linked to this). I don't know the specialist areas of old and new (particularly as this is a tax matter, and likely the field of a tax adviser - 1 may be, 1 may not, neither may be etc.). It just seems at the moment that you are double-represented. Certainly not a great idea - therefore - to have AWebbers as your third representative (with scant, and confusing facts)

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Replying to accounthelp987:
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By More unearned luck
11th Mar 2024 16:00

To echo Jason's point below if disassembly is required to make it mobile then all buildings are mobile as from time to time old buildings are demolished and rebuilt in a different place (or in the case of the Crooked House pub, to be rebuilt in the same place). For example London Bridge.

Fixtures and fittings are concepts of the law of property, not accounting concepts. Whether something is a fixture is a combination of the degree of affixation and of intention. Since you could spend the next twenty years living in your house ("if we ever move house"), the office building does not seem to be a temporary structure.

If the company had contracted with and paid with the builder. The accountant who said that it would be expense of the company's trade is correct (probably). But it would have been remiss of him or her not to have mentioned the benefit in kind it would give you.

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Replying to More unearned luck:
By Ruddles
11th Mar 2024 18:42

As someone once said here (it might even have been me) everything is moveable if you have a big enough hammer.

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Replying to Ruddles:
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By More unearned luck
11th Mar 2024 22:08

I think Archimedes beat you to it with "give me a lever long enough and a fulcrum on which to place it, and I shall move the world."

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Replying to Ruddles:
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By Paul Crowley
12th Mar 2024 00:29

Could have been Sister Sledge

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Replying to More unearned luck:
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By I'msorryIhaven'taclue
12th Mar 2024 09:09

As you're aware, the Americans who bought (old) London Bridge dismantled, transported, and rebuilt it in Arizona.

The rub is they thought they were buying Tower Bridge, and didn't twig until it was too late.

Anyways, £17,000 sound a bit strong for a 3m x 3m shed. OP, are its walls double skinned? Does it have the bog-standard felt roof that B&Q sheds have, or is it tiled? Is it some distance from your house and its garage, or is it in any way attached?

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Replying to I'msorryIhaven'taclue:
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By tom123
12th Mar 2024 11:58

I recommend a visit to Burford Garden Centre. They have some lovely garden buildings, should you have the funds and space for them..

I don't have either - but they are gorgeous.

Really nice orangeries etc too, that would look nice in ones walled kitchen garden..

Needless to say - quite a lot over £17k

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Replying to tom123:
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By I'msorryIhaven'taclue
12th Mar 2024 12:20

Ahha, I made it to Burford Gardens and Wildlife Park - they have a white rhino y'know - but have yet to sample the delights of Burford Garden Centre. I shall put it on my bucket list, up there with visit FAB in Birmingham!

I was placing perhaps too much emphasis on the OP's description "(garden shed type thing)". When I bought a large garden shed for use as an office a few houses ago the shedbuilder charged nearer £1700 (erection included!)

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Replying to I'msorryIhaven'taclue:
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By Paul Crowley
12th Mar 2024 12:37

'The rub is they thought they were buying Tower Bridge, and didn't twig until it was too late.'

QI have debunked this as an urban myth. If not then the selling agent must have been rubbish.

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
12th Mar 2024 13:19

https://web.archive.org/web/20120116071636/http://www.thisislocallondon....

Ivan Luckin, who arranged the bridge's sale, agrees with you Paul. There again, what else would he say!

'There is absolutely no truth in the rumour that the Americans thought they were getting Tower Bridge when they bought London Bridge!'

'The nagging suspicion was firmly quashed when we visited the man who sold London Bridge, Mr Ivan Luckin, at his Chorleywood home.'

"Of course not" thundered Mr Luckin with the sort of authority you expect in a City man.'

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By Jason Croke
11th Mar 2024 14:38

"The invoice is made out to a person, not my company. My wife originally paid £10k of the total amount to the company, and the invoice is addressed to her."

Clarity really matters. The above statement says "invoice made out to A PERSON", you then go onto say "My wife paid £10k of the total amount to the company and invoice is addressed TO HER".

Why did you start sentence "invoice made out to a person", why not just say "my wife" as it sort of implies there is a wife and another person involved here. Also, "wife paid £10k to the company", what do you mean, did she pay your company the £10k or the company making the supply of the garden office?

A later post from you states "I had £17k in my personal account, ready to pay for the home office. New accountant then told me I could expense it, so I bought it using company funds. That £17k went into my mortgage."

Why is the £17k in your personal account to pay for the garden office when your wife paid £10k of it already (seeing as the supply is addressed to her). Why is the £17k in your personal account when the company should have been paying for it at the time the supply was being made - did the company have the funds to pay for the works? Presumably not if the wife had to make partial payent.

How much did the actual garden office cost overall? Wife paid £10k, you had £17k in the bank but used it for something else, so is the total cost £10k, £17k or £27k?

Is your wife a Director of the business? If not, why is your wife buying a garden office for your company? If she is a Director of the business, why is the invoice addressed to her personally?

Is this a situation of reverse engineering a more favourable tax outcome? If so, it may be why the old/new Accountants are giving conflicting answers?

You state "wife paid £10k of the total amount to the company"....that suggests the cost of the garden office was more than £10k and wife has paid £10k herself and there is an amount outstanding of £7k or more ....so who paid the remaining cost of the garden office, the company, you personally or someone else?

Suspect "MoreUnearnedLuck" is on right path, a matter of fittings or fixtures and different approaches taken by the new/old Accountants, but trust you can see from my post here that even the basic setup of what is going on here is not entirely clear, and facts are essential in understanding the solution.

If you're suggesting the garden office cost upwards of £27k then that sounds substantial and is it truly "mobile" if you have to take it apart piece by piece?

I'm not expecting answers to any of my questions, I ask them simply to convey that what might appear a simple question from the OP is not simple upon further reading, there is a lot of ambiguity as to the why things were done the way they were done and there is plenty of missing information that only the old/new Accountant knows - such as who the Directors are, why the invoices are addressed personally when should have been to company, etc.

Maybe one solution is to go to your new accountant and ask them why the old accountant is saying something different, hopefully the new accountant will explain their reasoning, maybe the new accountant is making assumptions about you as you are still "new", whereas the old accountant has more facts relating to you, really don't see an issue with asking the new accountant to explain their reasonings.

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Replying to Jason Croke:
stonks
By WinterDragon
11th Mar 2024 14:47

This is a fantastic response that covers the areas of ambiguity and why it is important to ensure that you (OP/clients) understand the distinction between general guidance that may be given by an accountant in discussions and formal written advice that is given with consideration to the questions outlaid above.

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Replying to WinterDragon:
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By Tax Dragon
11th Mar 2024 15:58

+1. Top reply from Jason.

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Replying to Jason Croke:
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By I'msorryIhaven'taclue
12th Mar 2024 09:26

I particularly like your last paragraph, Jason; maybe the OP could step back from being piggy-in-the-middle by letting the old and the incoming accountant parlé with one another.

OP, you alluded to both accountants belonging to the same high-street chain; and if that means they're franchisees then try giving the franchisor a call and request that they (the franchisor) adjudicate on the matter. Ask for the full rationale for any conclusion(s) they reach, so that you're able to return here to regale us.

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By Tax Dragon
11th Mar 2024 16:04

Fwiw in my view none of "Declare it as a loan and pay it back; Declare it as a dividend" or "Adjust the loan against a dividend" makes any sense (especially in the light of the uncertainties/contradictions Jason pointed out). I'm not doubting your accountant, but suspect something has been lost in translation.

In addition to what has been said already, one of the issues is the benefit in kind. I don't doubt that this is mentioned in the articles Paul C recommends. I didn't see it mentioned in skimming down this thread.

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Replying to Tax Dragon:
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By More unearned luck
11th Mar 2024 17:54

I expect that you were typing at 4pm and wouldn't have seen my post timed then, rather than missed it in the skim read.

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By Paul Crowley
11th Mar 2024 16:20

I'm hoping my accountant's advice hasn't cost me £6,000, any help welcomed!
I suspect not.

Your wife bought a garden pod.
So at that time, it is clear that the company was not buying an office. I suspect that you did not take any action regarding the pod based on the advice received. So good news is that neither accountant has cost you any money concerning the tax liability. One has an opinion that it is nothing to do with the company, the other that for some reason the wife no longer wanted the pod and sold it at full price to the company.

Have I got that correct?

And by any chance are you now going to add that she is a director and joint shareholder?

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DougScott
By Dougscott
11th Mar 2024 17:37

Both accountants could be correct. As others have said we don't really have enough info.

If your old accountant did the accounts based on his understanding (from you) that the office was truely mobile and that the company had paid for it then he would be correct to treat it as an asset of the company and claim 100% Annual Investment Allowance on it.

What you need to do is clarify with the old accountant how he treated the home office for tax purposes and whether he claimed AIA or simply your drawings/dividend were reduce and you saved tax that way. Then clarify with your new accountant how he is treating the home office.

However it sounds like the old accountant didn't claim AIA on it because if he had done then the new accountant wouldn't be bothered as there would be no brought forward "pool" amount. So really your story doesn't seem to stack up.

However the company can pay for your home office whether it is mobile or not (in my view it doesn't sound mobile to me and I don't think it stands any chance of being considered as "plant and equipment" by HMRC!). It just becomes an asset of the company and it reduces your drawings/dividends for that year and hence reduces dividend tax on that amount by your marginal rate for that year only.

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Replying to Dougscott:
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By frankfx
11th Mar 2024 18:00

DougScott

Is AIA available?

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Replying to frankfx:
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By More unearned luck
11th Mar 2024 18:25

See the recent FTT decision re Acorn Ventures Ltd.

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Replying to More unearned luck:
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By frankfx
11th Mar 2024 20:20

More unearned luck wrote:

See the recent FTT decision re Acorn Ventures Ltd.

I was aware of the case.

The Garden Office is akin to the Teacher's Pod.

I find it difficult to justify that a Garden Office would be
"a moveable building intended to be moved in the course of a qualifying activity, with an evidenced intention to move the moveable building..... in the period of claim"

Just because the tax payer says it could or would be moved, may not cut it.

Am I adopting too narrow a view?

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Replying to frankfx:
DougScott
By Dougscott
11th Mar 2024 23:52

No, as I said I don't think HMRC would agree it was a moveable office. The only type of thing they are likely to agree are things like portacabins on building sites that move from site to site during the normal course of business. the OPs clearly doesn't.

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By Matrix
12th Mar 2024 08:22

Did the company reclaim the VAT?

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Replying to Matrix:
DougScott
By Dougscott
12th Mar 2024 11:14

Worth doing sometimes - could be £3000 on a £17000 or so spend. I did that with my home office which cost about £100,000 - it prompted a VAT Inspection of course!

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