It’s one of the most common questions we get: “Can my company pay for a garden office?” The answer is yes, partly, but the rules are more complex than they seem.

Like with everything involving HMRC, there are conditions to follow and boxes to tick, so you need to know what you can and can’t claim before moving ahead with any business decision. Here’s a quick guide to help (and how to keep things tax-efficient).

Business-only use vs business and private use

The tax treatment of your garden office hinges on one key factor: is it used 100% for business purposes, or do you use it for anything else (like storage, hobbies or guest space)?

HMRC is strict on this. If your garden office has any private use, even occasionally, it complicates what you can claim.

Let’s look at how it works in both cases.

1. If the garden office is 100% for business use

The company can pay for the build
The company can pay for the construction and fitting out of the office, including things like electrics, internet wiring and basic furniture.

You can’t claim capital allowances on the structure
HMRC doesn’t allow capital allowances on the building itself. So while the company can pay for it, you won’t get tax relief on the construction cost.

You can claim capital allowances on fixtures and fittings
This includes things like:

• Office furniture
• Electrical wiring
• Heating or cooling systems
• Lighting
  

Running costs can be claimed
You can claim ongoing business expenses such as:

• Electricity and heating
• Broadband and phone bills (business use only)
• Repairs and maintenance (again, only for business-related wear and tear)
  

No VAT recovery on residential elements
If the structure could be classed as suitable for residential use, VAT recovery might be limited.

2. If the garden office has mixed use (business and private)

The company shouldn’t pay for the build
If there’s any personal use, even just using it on the weekends or storing non-business items, HMRC will likely see it as a Benefit in Kind. That means you’ll need to report it, and potentially pay personal tax on the value.

You might be able to claim part of the running costs
If there’s both business and personal use, you can only claim the business proportion of ongoing expenses. For example, if you use it 70% for work and 30% for personal, you can only claim 70% of the running costs.

Capital allowances are not available
Just like with business-only use, the structure itself isn’t eligible for capital allowances, and with mixed use, the rules are even stricter.

Possible tax complications
Using the space for both business and personal reasons could trigger:

• A Benefit in Kind (which gets taxed).
• Capital Gains Tax complications if you sell your home in the future.

To put it simply, while it might be tempting to use the garden office as a bit of both, it could end up costing you more in tax.

So what’s the best approach?

If you want the most tax-efficient setup (which most business owners do), we’d recommend that you:

• Make the space 100% business only
• Keep clear records of all costs
• Avoid using the space for anything personal (no exceptions!)
• Speak to your accountant before you build to make sure everything is structured correctly
• Plan as early as possible, as this matters just as much as the paperwork.

Understand the tax rules before you build

A garden office can be a great investment, but only if it’s done right. So, make sure you understand the tax rule before you build! 

Knowing what you can claim, what you can’t, and how to avoid common tax traps will help you get the most out of it without unexpected costs later on.

Need help? We can advise on everything from planning and saving on tax to making sure you have the finances to support your growth plans. Get in touch – we’d love to help.