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.
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.
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.
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.
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.
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.
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Helen Thornley has a focus on personal and capital taxes. Initially training as an accountant before moving to tax, she worked in practice until her appointment as a technical officer in 2017. She also has an interest in the history of tax.