Tips for setting up an office to work at home

Laptop wires, computer monitors and papers taking over your kitchen table? Worried your computer is about to be splattered with Ketchup? Constantly in fear of finding important papers in a bath of orange squash?

If you’re currently working from home like most of the nation (60% to be exact!), then you might be considering more permanent work from home opportunities, such as setting up an office in your back garden.

After all, wouldn’t it be great to have a space, which looks like a proper office? Shelving for all your important paperwork and books; a filing cabinet for all your receipts and invoices to keep your local accountant happy; and a comfortable office chair, so you don’t end up with back problems. And that’s before you factor in the peace and quiet, and the opportunity to achieve a better work-family balance.

But if you are considering setting up a home office, there’s a lot to consider. We take a look at some of the key factors you need to consider before you start your building project.

Check if you need planning permission

More often than not, you won’t need planning permission to build a home office in your garden. However, in some circumstances planning permission can apply, so do some thorough research and adhere to any conditions under the planning laws to make sure you’re not caught out.

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Find out if you will need to pay Business Rates

Bear in mind that some local authorities may charge business rates if you are running your business from a garden office. However, small businesses and those based in rural or designated economic areas often qualify for significant business rate reliefs, so you may not have to pay a great deal. Reliefs vary by local authority, so do take local advice.

Claim back any VAT you are due

As long as your business is VAT registered, you should be able to claim back VAT on some or all of the cost of your garden office and its contents. This includes heating, furniture and equipment.

However, if your business is on the VAT Flat Rate Scheme then you can only claim back VAT on capital goods that cost over £2,000 in a single purchase.

Also, any VAT you claim will be limited depending on the expected personal use of your garden office.

If you’re not sure what you can and can’t claim, please get in touch. As local tax accountants, we can offer you up-to-date and knowledgeable support to make sure you claim back everything you are due.

Factor in Capital Gains Tax

Capital Gains Tax applies when you make a profit from selling a property that’s not your home. So, if your garden office is used and accounted for exclusively for commercial use, you may be liable for Capital Gains Tax on the value of the office.

If you’re only using your garden office on a part-time basis or know that once lockdown is finished your work from home job will be over and you’ll be back commuting to an office each day, think about letting the family use it as well. After all, not only is the end of the garden a great place to send your teenagers when they invite their friends around, but you might save yourself from having to pay any Capital Gains Tax.

Understand the implications of Benefit In Kind

The flip side of using your office personally is that HMRC will view this as a Benefit In Kind. A Benefit In Kind is a non-cash benefit provided to employees, but because they have some monetary value, they must be treated as taxable income.

So, if your home garden office doubles up as somewhere for your children to play or even something as simple as a place for you to relax and read a book at the weekend, then you’ll end up paying personal tax.

Bear in mind, that even if you have genuinely installed a garden office for the sole use of working from home, it can be extremely difficult to prove this to HMRC, so be prepared to justify this or you’ll end up paying Benefit In Kind tax.

Work out what you can offset against your profits for Corporation Tax purposes

As with everything, whether you can offset the cost of your garden office against Corporation Tax depends on whether you meet certain criteria. The general rule is that you can’t claim the cost of the structure including planning, building and installation because an office is not classed as having a “productive or industrial function” but as a location where these functions take place.

However, any business equipment purchases can be classified as a capital expense and will qualify for capital allowances. This may even include the costs of furniture, plumbing and even some of the electrical work. If in doubt, please give us a call! As a local accountancy service, we are used to advising clients of all sizes on tax issues, so will be happy to help out.

Get in contact with Palmers Business Support for more advice

Hopefully, this blog will have given you some tips for setting up your home office, but if you have any concerns, please get in touch.

Some of the issues are complex and as each business will have different and unique circumstances, you need to make sure you have all the right information, so you don’t get caught out by the tax man. Providing business growth advice is also one of our fortes, so we’ll also be happy to advise whether a permanent home office would be the right choice for you and your business.