The tax implications of building a ‘shoffice’ in the garden

It’s been, unbelievably, almost two years now since workers across the UK were first told to “stay safe and work from home” at the outset of the COVID-19 pandemic.

While at first this was a daunting and unsettling prospect for many, as time has passed many professionals have now become well-adjusted to the ‘new normal’ of working life, aided by many firms investing in sizeable digital transformations and the explosion of platforms like Microsoft Teams and Zoom keeping us connected and linked in, wherever we may be.

As the pandemic continues to surge on and hybrid working looks to become the fixed pattern for many going forward, there’s now a growing trend towards building home office set-ups in gardens, or the ‘shoffice’ as some have dubbed it. Garden building sales reportedly increased by a whopping 500% year-on-year between January and May 2021 when the UK faced its longest lockdown yet, with shed sales up by 460% compared to a year earlier.

There are, of course, obvious benefits to this: a dedicated outbuilding provides the chance to create a clear distinction between work and family life, the ability to control the working environment and the flexibility that home working can afford in the long term.

Yet as work sheds, pods and outdoor offices are embraced by more and more WFH advocates across the UK, there are serious tax implications that it pays to be aware of before investing in your shiny new work haven:

• One benefit of working from home, long-term, is being able to charge either your employer, or your own firm if you are a company director, a small rent for the working space as a benefit in kind as the individual. However, it’s worth being aware that, if the space is not being used entirely for work-related activities, then there could be a capital gains tax impact.
  
  
• Thinking longer-term, beyond the pandemic working priorities of the here and now, what happens when you look to sell your house in the future? Have you planned for that? If you have made the decision to build a bespoke outdoor office that is purely to be used for work and nothing else (and are charging proportionate rent in turn) then this may have an effect on the capital gains tax when it comes to selling the property, as you would be unable to claim tax-free principal private residence relief (PPR).
  
  
• For VAT registered companies purchasing the home office through the business, there is the option to claim back the VAT, although corporation tax for the cost of the new structure will not be deducted. Provided that the contents are also 100% for business use, you may also be able to claim back the VAT on these, but this will differ from business to business.
  
  
• Have you factored in ongoing running costs? Like any dwelling, there will be multiple costs attached to the new outbuilding. Lighting and heating costs are tax-deductible, as are repairs and redecoration costs. Council tax, planning permission and connecting to utilities are all additional, potentially very pricey, costs that will also need to be carefully factored in before breaking ground on your new garden workspace.

Is it right for me?

Building a home office is an exciting but also big decision – and one that shouldn’t be entered into lightly. Here at Gooding Accounts, we’re passionate about helping people to make the right choices for them, their business and their lifestyles. Book an appointment today to speak with our experienced team of accountancy specialists and we’ll be happy to help you take the best next step forward for you.