ATT Technical Officer The Association of Taxation Technicians
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The garden office part 1: Planning and rates

Helen Thornley tackles the tax matters and other practical legal issues that may arise when a business operates from a pod building in the garden. It’s a big topic, so this is the first of a series of articles.

4th Dec 2020
ATT Technical Officer The Association of Taxation Technicians
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A garden office

Homeworking has its perks and downsides, but the one of the keys to success is working out how to accommodate it on a sustainable basis. For some, the solution to space and family interruptions might be some form of garden office pod.

Planning matters

The idea of working in the garden is not a new concept. Roahl Dahl wrote his books in a hut built of bricks at the bottom of his garden. Constructed in the 1950s, Dahl’s writing hut cost the princely sum of £80. More recently, the ‘shepherd’s hut’ that David Cameron was reported to have completed his literary endeavours in was estimated to have cost in the region of £25,000.

In these articles I’m going to look at the new trend for free-standing garden office pods, rather than the bricks and mortar approach adopted by Dahl. I’m also assuming that the individual who is planning on constructing or installing the pod will use it to run their own business, either as a sole trader, partner, or as a director of a limited company.  So I will examine the potential tax reliefs for their business.

The garden office pod

There is a huge range of options for garden office ‘pods’ on the market, from kits which are little more than glorified sheds, to fully insulated, self-contained units costing the tens of thousands which can be built from flat pack or winched into place fully formed ready to be plumbed in. In theory, with such a variety of options, there should be a solution that fits the individual’s available budget and outdoor space.

One major advantage promoted by many suppliers of garden office pods is that, provided certain requirements in terms of the size of the pod and its location on the plot are met, planning permission is not generally required, thanks to the permitted development rules.

In fact, this might not be the case for units intended for 100% business use, as the availability of permitted development rights also depends on the usage intended for the pod. While a need for formal planning permission means more upfront costs, it might be useful down the line as further evidence that the property is intended for business use, depending on the wider facts.

Detailed rules

Details of the permitted development rules (for England and Wales only) are available on the planning portal. This links to the government’s detailed technical advice on class E ‘outbuildings’ – into which category it appears that garden pods fall. These rules highlight that the use of any outbuilding must be ‘incidental to the enjoyment of the dwelling house’.

There doesn’t appear to be a definition of incidental use for planning purposes, but presumably it will depend on the nature of operations intended to be carried out from the garden office.

An individual looking for a bit of space away from the family and to move out of a spare room might reasonably claim that the use of the office pod is incidental to their use of their home. On the other hand, someone looking to run a business with staff out of their garden office, or a physiotherapist expecting a string of clients daily, will have a much less convincing argument that such usage is incidental to the residence.

Regardless of what the sales brochures say, if the intended use will be fully or largely business, formal planning permission may well be needed.

Since most accountants are not planning experts, it will be worth seeking advice and confirming the position with the local council. It’s far better to incur some upfront planning costs, than face the costs of removing a structure which does meet permitted development rules.

Business rates

The other matter to resolve with the local council before installing a new pod is the position for business rates. Government guidance suggests that making changes to the home to accommodate the business can create business rates issues.

If business rates are applicable, then it may be possible to mitigate the costs with small business rates relief. This reduces the charge to nil provided that the business only uses one property, and the rateable value of that property is less than £15,000.

Again, the application for that relief is made via your local council.

Next steps

Once the planning permission position has been resolved, the next question is who will pay for the pod? This could be the individual in their personal capacity, or their business - which might well be incorporated.

In the next article we will look at the potential tax implications depending on the ownership and usage of the pod.

Replies (6)

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By jford
05th Dec 2020 11:06

Thanks Helen. That’s really useful. I’m looking forward to part 2.

Thanks (4)
By Rgab1947
07th Dec 2020 10:09

‘incidental to the enjoyment of the dwelling house’.

I can assure anybody that me having a garden office will certainly make me and my wife enjoy the house more. I tried using a bedroom. I wanted to stay married so got a garden office.

Its petty bureaucracy at it again.

I can understand if you have staff (Heh WFH is the idea) but for me going stir crazy with WFH in my garden office the last thing I need is a council official arguing business rates.

Its the new norm WFH in a garden office.

Thanks (1)
By markabacus
07th Dec 2020 11:08

Thanks from me too Helen. Also looking forwrd to part II

Right coffee break over back t work those tax rtns won't do themselves LOL

Thanks (0)
By LGrainger
07th Dec 2020 12:08

It is always worth checking out the planning position, particularly in a suburban area, where objections by neighbouring proprietors are more common.

The nature and scale of the building can also have a positive (not necessarily a matter of common sense) or a negative impact, if you come to resell your home.

For example just a few years down the road, an ill-maintained wooden structure (no matter how costly, initially) can deteriorate from asset-to-eyesore.

Then there can be removal costs. For example, ageing Portakabin-type buildings can be very expensive to remove, particularly if they have become hemmed in by trees and require an expensive crane (and insurance) to lift them. Even in our rural area on a flat site, it cost me approximately £1000 to have a substantial mobile home (used for stable staff) removed and disposed of. This type of building can be temptingly cheap to buy, simply because of removal and re-siting costs.

But worst of all for a suburban seller, the type of warranties that are now demanded by purchasers and their mortgage funders, coupled with the uncertainty of not having planning consent , can cause delays and uncertainty in completing transactions. So keep it as small as possible and make sure you can exhibit the required consents.

Thanks (0)
By cfield
08th Dec 2020 10:10

Last time I looked at business rates for home offices, they were exempt unless a) it was specially adapted for business use (which excludes broadband connections), b) there is no public access, and c) the room retains some domestic use. The latter is also relevant for CGT purposes, assuming it is owned by the householder, not his/her company.

As I see it, so long as you use it strictly as a home office (no employees, no deliveries, no customers) keep some domestic use (just put in a TV or a bike), and don't turn it into a workshop, you should be OK on planning permission, business rates and CGT.

Thanks (0)
By Justin Bryant
08th Dec 2020 13:01

Jeffery Archer wrote his novels in a funny folly type building in his garden at Grantchester. I once visited him there and he explained it all to me (before he got jailed I think). I guess it's always been popular with arty types.

I never liked Roahl Dahl novels as I got him confused with Gerald Durrell who wrote a very boring book that I was forced to read at school. Interestingly I saw in the news recently that I had a proper reason to dislike RD all along.

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