Posh Log Cabin → Office → Business Expense?

Find out whether your garden office could be a business expense.

What is it?

Working from home has been the dream for countless people across the country, and because of Covid-19 they have been doing, though not quite in the manner many expected.

If Covid-19 continues and more people are working from home, there is sure to be an increase in the number of Garden offices.

The big question is, can these new offices be claimed as business expenses?

Do the Covid-19 tax rules apply?

Since the outbreak of Covid-19 and the subsequent lock-down, the government has eased certain rules, allowing companies to reimburse staff for any equipment they needed to be able to work from home.

The key part of those rules being the term equipment. Unfortunately, a Garden Office is a structure, and not equipment.

This means that is would be classified as a business asset, and the employees will still have to pay income tax.

But what about the equipment in the office?

Thankfully, the equipment in the office still does count as equipment, and so you can reimburse your employees for computers, desks, etc., without making them owe any extra income tax.

However, there are two important rules:

  • The equipment must be bought for the sole purpose of allowing the employee to work from home due to the pandemic.
  • The equipment should normally have been exempt from taxation if your company had given it to the employee.

What about benefit in kind payments?

If the employee’s Garden Office is only for business use and never for private, then there is no benefit in kind, and they won’t need to pay extra tax.

However, if 20% of the use is for private, then they will have a benefit in kind charge for the 20% they use privately.

If the Office cost £10,000 and the employee pays 40% tax, then they would pay 40% of £2,000 or £800.

What’s the most tax efficient way to do it?

The first step is to get the employee to buy the garden office so that they own it themselves. You can even loan them the money up to £5,000 with no tax implications.

Then if you pay the employee an additional payment which covers the loan repayments. This is subject to tax and national insurance.

Then reimburse the employee directly for any office equipment they need to buy through the Covid-19 tax rules.

This effectively buys the employee the Garden Office, with no benefits in kind, no company obligations, and no National Insurance beyond the payments to cover the loan repayment.