ATT Technical Officer The Association of Taxation Technicians
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Garden office shed
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The garden office part 3: Business ownership

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Some garden offices are intended to be used entirely for business and, if so, it’s worth exploring which costs of installation and construction the business can incur without creating tax problems.

8th Jan 2021
ATT Technical Officer The Association of Taxation Technicians
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Where the garden office pod is purely used for business there is likely to be a much greater desire to achieve the maximum tax benefits for the business. 

Structures and Buildings Allowances 

Could there be any reliefs for the structure itself if it’s owned by the business? 

A garden pod in and of itself falls within the category of a structure for the structures and buildings allowance (SBA) introduced in October 2018. This allows relief at 3% per year on a straight-line basis on the costs of the construction of non-residential buildings. 

However, SBAs are not intended for buildings with residential use. In HMRC’s original technical note from 2018, it stated that “no relief will be provided for work spaces within domestic settings, such as home-offices”. Subsequently, in June 2019, the Government noted that legislation would be introduced to clarify that assets within the curtilage of a residential structure or building would also be excluded. 

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Replies (11)

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By Matrix
09th Jan 2021 11:02

Thanks and I like your conclusion. The problem is that clients email expecting a yes or no answer and everyone seems to think there are lots of WFH allowances around due to Covid.

I am not sure I follow the BIK. If the company has paid for the pod and it is 100% business use then why is there a benefit?

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By nick farrow
11th Jan 2021 10:38

thank you v much i will read later

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By nick farrow
11th Jan 2021 10:38

thank you v much i will read later

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By Rgab1947
11th Jan 2021 10:46

A pod seen as a building at 3%?

A wooden shed is not going to last 30 years. I do not see it as a building, especially as not permanent (its capable of being dismantled and moved). I suppose if it has plumbing and is build as accommodation (most sheds may not legally be used as accommodation) one could argue but most are just wired for electricity (wifi for broadband).

Councils do not see it as requiring planning permissions as not permanent. The only rule in my area is it must be below 2.3m in max height. Office use is allowed without planning or rates subject to own use not public.

Dual use obviously raises tax issues if claiming it as a business expense.

With WFH becoming big there has to be some flexibility and clarity.

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7om
By Tom 7000
11th Jan 2021 11:41

Generally I say, yes you will be a little better off in year one but the BINK erodes this and in due course you will be worse off. ...

Then I give them a help sheet like this but with all the maths in showing why...

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By cfield
11th Jan 2021 13:38

Basically this is just a long list of reasons why it is almost always better to pay for a garden office yourself, rent it to your company and claim a reasonable % of council tax and utility bills. You can still buy the furniture/equipment in the company name and claim AIA.

Good to have a checklist of all the reasons why it's usually inadvisable to do it through the company though, just in case clients ask or are difficult to convince. If you can't afford the money and need company funds, borrow them on your loan account. It will be cheaper than a 20% MV BIK.

It would have to be a pretty big and expensive structure to make it worthwhile getting the company to pay, and even then it can be a minefield, as explained above.

Whichever route you take, always ensure business use ceases before you sell the house. PRR on the garden and grounds is not restricted for past use, only for existing use. That's because the relevant clause in TCGA 92 is written in the present tense.

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Replying to cfield:
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By BJNATHAN
11th May 2021 17:27

Do you know where I can find that relevant clause within TCGA 92?

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Replying to BJNATHAN:
By cfield
11th May 2021 19:25

Yes, on the internet!

Check out s222(1)(b). This is why people selling off their gardens can lose PRR if they fence off the land or start developing it before contracts take legal effect. This is what nearly happened in the 2013 tribunal case of Anne Dickinson v HMRC. She got away with it, but only because there were land access issues and the contract was voidable. Fortunately the land had not been permanently altered. It was a warning shot across the bows. HMRC take this clause very seriously.

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Replying to cfield:
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By BJNATHAN
12th May 2021 17:52

How long would you suggest stopping the business use prior to making the sale?

In the example, HMRC gives in CG65110 the break is 3 years between stoping and selling.

Could the business use cease 1 day prior to exchanging and full PPR is then obtained the next day on the sale?

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Replying to BJNATHAN:
By cfield
12th May 2021 19:27

How long is a piece of string? In theory 1 day would do it, as the legislation is quite explicit that it is only the use on the date of disposal that is relevant. However, the land must qualify as garden and grounds, which according to CG64360 means that, at least as far as the garden is concerned, it must serve chiefly for ornament or recreation.

If business use was to cease 1 day before, would there be time for the land to start being used as garden and grounds? Depends what you did with it I suppose, but it would clearly be wise not to leave it so late if you want PRR relief on a disposal of the land. I wouldn't have thought taking down enclosures and putting them up again 2 days later would cut the mustard. Also, if the land has been substantially altered for business use in any way, that would probably fail the subjective test too.

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Replying to cfield:
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By BJNATHAN
11th May 2021 17:27

Do you know where I can find that relevant clause within TCGA 92?

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