June 25, 2022


Amongst tens of millions of folks all over the Uk, WFH, or “working from home” has set off an explosion of fascination in the possibilities of shopping for or creating a do the job-relevant drop, pod or property office space in a secluded corner of the back garden.

Absent from the noise of the Dyson, the barking of pet dogs and the incessant calls for of household-schooled youngsters, a detached, heat, yet “cool”, perfectly-geared up and trendy household operating setting is the desire of many aspiring WFH devotees.

But, be warned: this is a complicated place &#8211 so a great deal so that any this sort of program involves shut scrutiny from your tested professional adviser. If you convert a lose or buy or construct a new backyard pods to operate from house, you need to have to check with on your own about the tax implications.

Initially, there are income tax concerns if you find to cost your employer, or your possess organization, a rent for you to get the job done from dwelling. As well, any particular use of the household business office would be a profit in kind and a tax cost would be elevated on the specific.

If no charge is raised there would be no advantage in type for personal use and the person could probably hire it again to the enterprise, but you may well want to contemplate restricting this to 5 days a week so that it is not wholly for business office use as this can have a cash gains tax implication.

2nd, what about the Cash Gains Tax implications of owning a ‘pod’ or static office environment constructed in your backyard garden when you later consider to offer your house?

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If the residence office environment had been utilised 100 for each cent for business enterprise then it could likely affect the cash gains on the sale of the house as this &#8220portion&#8221 of the residence would no for a longer period qualify for Principal Personal Home Relief (PPR) and so is no extended tax totally free.

3rd, if you acquire a household business office by way of a firm which is VAT registered, you need to be ready to assert back the VAT, but there will be no deduction for corporation tax for the expense of the “structure”.

You may be able also to declare back VAT on its contents, all of which usually means you have to guarantee that any claims designed for a tax deduction or relief have to be appropriate. To get these reliefs, you might require to declare that it is for 100 per cent business use.

If, on the other hand, it is not procured via the firm then there would be no VAT recoverable nevertheless paying for it could be rather high-priced for an personal.

In addition, there are other matters to think about other than tax, this kind of as Council Tax, organizing authorization, connectivity to gas, electrical power and water.

This is just touching the surface area, and each individual person desires to operate the numbers for his or her personal situations to see whether or not or not it is beneficial.

In summary, the desire of working from your garden will develop a quantity of unidentified tax liabilities for persons that they and their businesses may not be aware of.

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This is almost certainly not what you want to hear, but the bottom line is: believe difficult just before acting and talk to your accountants.

Ian McMonagle, a Chartered Tax Adviser who sits on the Scottish Committee of the Chartered Institute of Taxation, is Taxation Director at Russell & Russell, small business advisers.

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