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Capital allowances on garden office P&M

Capital allowances on garden office P&M

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My client runs a one man limited company providing computer services.                                                                                                                                           
The company recently paid a total of £36,000 for a garden office to be built in his garden.                                                                                                                                                                                                                                                                                                                                                                
 
 
       HMRC provide a list of what may qualify for capital allowances in a new build and having provided 
this list to my client, he has come up with the following as a potential claim amounting to £16874.
I am by no means sure that all these amounts will qualify but do not have much experience
of claims like these.                                           
 
 
                                                                                            Can anyone please comment on my client's list and guide me as to which of the various items
can be legitimately claimed?                                                                                                                                                                                                 
 
Many thanks                                                                                                                                                                                                                                    
 
(2)      Gas and sewerage systems and, for expenditure incurred before 6 April 2008 (1 April 2008 for corporation tax purposes), electrical systems (including lighting systems) and cold water systems, provided mainly to meet the particular requirements of the qualifying activity, or provided mainly to serve particular plant or machinery used for the purposes of that activity.
 
Services Pump £632.00                                                                                                                                                                                                           
                                    (5)      Cookers, washing machines, dishwashers, refrigerators and similar equipment; washbasins, sinks, baths, showers, sanitary ware and similar equipment; and furniture and furnishings.
 
Bathroom sanitaryware £976.00
 
Kitchen - units / cooker worktop etc £1,400.00
 
Fitting £450.00                                                                                                                                                                                                                         
 
                                                       (7)      Sound insulation provided mainly to meet the particular requirements of the qualifying activity.
 
Triple Glazed windows £6,400.00
 
Soundproof plasterboard £400.00
 
Fitting £400.00                                                                                                                                                                                                                
(25)   The provision of pipelines, or underground ducts or tunnels with a primary purpose of carrying utility conduits.
 
Services ducting inc install £798.00
 
External/External Drainage works / External/Internal electrical works / Internal plumbing HW/ CW / Phone & Internet / Heaters inc Water Heater- Supply and Fit £5418.00
 

Replies (20)

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Euan's picture
By Euan MacLennan
14th Nov 2014 10:04

Is it just me?

... or does everyone else see the same with the text in the question extending into the Latest Answers and Unanswered columns?  I use Firefox.

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Replying to pauljohnston:
By James Reeves
14th Nov 2014 11:01

Fixed width

Euan MacLennan wrote:

... or does everyone else see the same with the text in the question extending into the Latest Answers and Unanswered columns?  I use Firefox.

Yes the same. The OP has pasted an HTML table with a fixed width attribute, so it will look shocking in most browsers.

 

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By sirp2000
14th Nov 2014 11:06

Sorry

I have edited the question so it fits in the box.

 

Unfortunately, I do not seem to be able to separate the paragraphs.

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Replying to paul.benny:
Portia profile image
By Portia Nina Levin
14th Nov 2014 11:10

I doubt anybody will bother reading it now

sirp2000 wrote:

Unfortunately, I do not seem to be able to separate the paragraphs.

I know I am not going to.

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By James Reeves
14th Nov 2014 11:22

A quick read

On a quick read, I would say that claiming nearly 50% of the build costs seems excessive. I'd be asking what kind of computer service activity requires triple glazing and sound proofing and a water pump, so I'd want to scratch that lot which would result in a far more reasonable claim.

The client presumably has itemised receipts to backup the cost breakdown?

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By sirp2000
14th Nov 2014 12:38

Thanks James

I agree that if all the items were claimed it would seem excessive.

 

However, it seems difficult to gauge exactly what is legitimately claimable and what is not.

 

The triple glazing and sound proofing would just be to create a quiet work environment.

 

The water pump would be for the office toilet.

 

Any more guidance from people with experience of there types of claim would be most welcome.

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Portia profile image
By Portia Nina Levin
14th Nov 2014 13:17

Does he sell sandwiches?

I am struggling with IT guy needing a kitchen in his garden office. Is he Jamie Oliver?

I agree with James on the soundproofing and treble glazing. What is it about providing computer services particularly that makes it necessary to be able to hear a pin drop and feel all toasty. That is the "for the particular requirements of the trade" test.

Other than that I would be inclined to go for it all and argue the toss with HMRC.

You should make whatever claim your client wants really. He is not being dishonest, just pushing boundaries.

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By beresfordt
15th Nov 2014 08:43

Rather excessive
I think the current claim level is rather excessive - in my humble experience of specialising in CA claims on property for over 25 year!

Ultimately the garden office will be treated no differently to any other building or structure.

Next, in order to claim Plant and Machinery allowances the expenditure must not only be on items of plant and machinery acquired wholly or partly for the purposes of a qualifying activity (with any disallowance for "partly" depending on the status of the claimant).

Assuming, for simplicity purposes, the garden office was provided solely for your client's business then we can assume there is no need to make any disallowance.

Importantly allowances are given on the provision cost of the plant and machinery and so any fitting costs of qualifying items can be included within the claim cost for that item.

Moving on to the list you have provided then the pump will qualify as this is a piece of machinery.

The sanitary fittings (including wastes and any hot and cold water services) would qualify as would the kitchen fittings and appliances (whether he needs the kitchen is his decision).

Like others I don't think the triple glazing or sound insulation would qualify. Why is this a requirement of his trade. In your client's case this is just part of the building. It could potentially qualify if he was using the office as a recording studio but not sure why it is required for computer services.

Finally with regards the ducts, pipelines etc. then anything that provides mains services to the property (including underground ductwork) will not qualify - these are a requirement of any building. Similarly the external drainage will not qualify.

Internally the electrical, heating and plumbing installations will qualify as would any external lights and any CCTV if any has been provided.

Next, you need to be aware that the qualifying expenditure needs splitting between the appropriate pools into which it falls (main pool or special rate) - although looking at the level of qualifying expenditure you're talking about then most of it should be covered by your clients AIA.

Hope that helps.

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By sirp2000
15th Nov 2014 09:59

Thanks Beresfordt

for your very helpful and comprehensive reply. We are now narrowing down the list!

I totally agree about the glazing etc. Please note my client is not trying anything on here, he just wants to know what can be claimed and what can't.

With regard to ducts etc, paragraph 4.28 of Tolley's Capital Allowances lists the following as items that are not necessarily disallowed:

"(25)     The provision of pipelines, or underground ducts or tunnels with a primary purpose of carrying utility conduits."

Can you therefore please expand on why it can't be claimed in this case?

Many thanks

 

 

 

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By beresfordt
15th Nov 2014 13:32

Utility conduits
My reasoning is I suspect what the pipes and conduits are carrying are cables and pipework from your client's household supplies which now extend the services to his garden office rather than new services installed by utility providers.

Additionally you need to consider CAA2001 s21 list A item 2 which states that assets treated as buildings include mains services and systems for water, electricity and gas. However certain electrical, heating and plumbing installations are allowed by virtue of s23 list C - this though does not extend to the provision of mains services.

Whilst I think the Tolley's book you refer to is a well written and useful guide it should not be a substitute for the legislation.

Does that help?

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By sirp2000
15th Nov 2014 13:50

Thank you

Yes, that's very helpful.

I will now go back to my client with a whittled down list and get the claim finalised.

Thank you to all who contributed.

 

 

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By PracticePartner
15th Nov 2014 13:51

All the rage

Nice to see another garden office discussion! To the OP, it sounds like it is a bespoke building as opposed to a "flatpacked" garden office? If so is the client concerned about potential CGT implications?

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By cfield
17th Nov 2014 12:45

Who owns the office?

The OP said it was a one-man company. Has his client put the office in the name of the company or does he own it himself? Surely, capital allowances can only be claimed by the owner of the asset (apart from HP or finance leases where the lessee is recognised as owner from the start).

If he was a sole trader, then maybe he could claim CAs on certain items but I don't see how his company can if it merely lets the office or (more likely) uses it on license.

Of course, it could claim capital allowances on individual assets within the office, such as furniture or computers, if purchased in its name, but not anything that is part of the fabric of the building.

If the office is owned by the company, then he'd better pull it down or put it in his own name (and stop using it for business) before he sells the house or his PPR will be restricted.

If there is perchance a valid claim for CAs on fixtures and fittings, he should be getting bespoke advice from a specialist firm, not a free public forum. 

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By PracticePartner
17th Nov 2014 13:20

Legal entity distinct from its members

There is no such thing as a "one man company" (at least not since One Man Limited was dissolved in 2011), although I accept the term has colloquial meaning. The OP says that the company paid for the office so hopefully it got invoices in its name. Also hopefully the company is VAT registered and could recover any VAT it incurred.

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Replying to Caber Feidh:
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By bosclibby
17th Nov 2014 13:38

Recover VAT?

PracticePartner wrote:

There is no such thing as a "one man company" (at least not since One Man Limited was dissolved in 2011), although I accept the term has colloquial meaning. The OP says that the company paid for the office so hopefully it got invoices in its name. Also hopefully the company is VAT registered and could recover any VAT it incurred.

Slightly off the original thread of CAs but possibly relevant - is it quite that simple that the company could reclaim the VAT on the "garden office" if it is situated in the garden of the house owned personally by the director (and possibly his wife) even if the invoices are in the company name?

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By ringi
17th Nov 2014 13:36

capital gains tax

What about capital gains tax risk when the house is sold….

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By rbw
17th Nov 2014 14:33

Business rates

Claiming the "office" is used solely for business maximises (and simplifies) any CAs claim.  But (subject to my being out of date) it risks the local authority asking for business rates on what sounds like rather more than the usual "garden shed".

OTOH if there is both P&M owned by the company and private use ISTM there is a benefit from the office/employment.

 

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Replying to DJKL:
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By PracticePartner
18th Nov 2014 14:38

Business rates

rbw wrote:

Claiming the "office" is used solely for business maximises (and simplifies) any CAs claim.  But (subject to my being out of date) it risks the local authority asking for business rates on what sounds like rather more than the usual "garden shed".

OTOH if there is both P&M owned by the company and private use ISTM there is a benefit from the office/employment.

I doubt the average local authority will be too bothered especially if the office/shed/whatever looks like a normal outbuilding and is put up under permitted development regs. Different matter if the client lives in an AONB perhaps (that's Area of Outstanding Natural Beauty to anyone who thinks that's txt spk!)

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Portia profile image
By Portia Nina Levin
17th Nov 2014 14:44

txt spk

Irritates the tits[***] off me. WTF is ISTM?

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By beresfordt
17th Nov 2014 22:12

Treated as belonging
I accept the point about ownership - although I would have thought the householder had given his business permission to put the office in the garden. As such that interest in land granted to the company/business would normally allow any qualifying fixtures in the office to treated as belonging to the company/business.

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