Working from your shed? Garden Office Tax Relief

Garden Office Tax Relief

Although we’re technically out of lockdown, it doesn’t much feel like it to most individuals. Also, unless your job necessitates you physically going to your place of work, such as an electrician or a mechanic, the Government is still urging us to work from home, where possible.

This rather neatly brings me on to the subject of garden sheds, or their latter-day modern equivalent, free-standing garden office pods, which in reality are just upmarket insulated garden sheds.

Garden Office Tax Relief: Working from home

Homeworking has always had its perks and downsides, but one of the keys to success is working out how to accommodate it on a sustainable basis. Many use a spare bedroom as an office, others simply use the kitchen table and for some, the solution to space and especially family interruptions might be some form of office in the garden.

The idea of working in the garden is not a new concept. Roahl Dahl wrote his books in a hut built of bricks at the bottom of his garden. Constructed in the 1950s, Dahl’s writing hut cost the princely sum of £80. More recently, the ‘shepherd’s hut’ that David Cameron was reported to have completed his literary endeavours in was estimated to have cost in the region of £25,000.

Garden Office Tax Relief: What about planning?

One major advantage promoted by many suppliers of garden office pods is that, provided certain requirements in terms of the size of the pod and its location on the plot are met, planning permission is not generally required, thanks to the permitted development rules.

Unfortunately, this might not be the case for units intended for 100% business use, as the availability of permitted development rights also depends on the usage intended for the pod. While a need for formal planning permission means more upfront costs, it might be useful down the line if HMRC request further evidence that the property is intended for business use.

Details of the permitted development rules are available on the planning portal which links to the government’s detailed technical advice on class E ‘outbuildings’ – into which category it appears that garden pods fall. These rules highlight that the use of any outbuilding must be ‘incidental to the enjoyment of the dwelling house’. There isn’t a specific definition of incidental use for planning purposes, so it will depend on the nature of operations intended to be carried out from the garden office.

It has reception and executive floor

In a recent case I was involved with, a drumming teacher applied for planning for an insulated pod to teach drumming. His local Council informed him that in law, an acceptable sound level is 55dB during daytime (6am to 9pm) in residential areas. This is defined as audible and approximately the equivalent of a coffee percolator or a normal voice level, so common-sense would suggest that providing the use is not over 55dB except for short periods, you should be okay. As an equivalent example, a lawnmower is around 90 dB and that is allowed providing the use is not excessive. My client installed additional soundproofing and got his planning approval.

Also the key rules are that any garden office cannot be more than 2 metres high at the eaves, be no more than a maximum of four metres in overall height, occupy no more than half the area of land around the “original house” and not be within two metres of a boundary of the garden. For more detailed information, follow→   

Garden Office Tax Relief: Next steps

Once planning permission has been resolved, if you do need permission for business use, this would solve any potential problems with HMRC in the future, without incurring business rates, as it is highly likely that the converted shed or pod, will be eligible for 100% business rates relief.

The next question is who will pay for the pod? Should it be the individual in their personal capacity or their business – which might well be a limited company? My research indicates that if you intend to claim for tax relief on the cost of the pod and any running costs, such as electricity, the pod should be purchased in the name of your business.

Garden Office Tax Relief: How Much?

Once you’ve jumped through the necessary hoops with your Local Council and the planners (if applicable) and bought your garden shed, just how much tax relief can you claim?

The quick answer is it depends. If you’ve followed the correct steps as my drum teacher client did, HMRC will allow 100% of the cost, including the installation of electrics and plumbing, to be eligible for Capital Allowances. They will also agree to100% of the water board and electricity charges providing separate metres were fitted. If not a reasonable percentage of the household bills would be allowed.

Garden Office Tax Relief: Is there anything else I should know?

Just a couple of things; the key is to do your research in advance of purchasing the shed or pod and either get a permitted use exemption or full planning permission before getting out your credit card.

You should also bear in mind that at some stage you may have to justify the shed as being used for 100% for your business activities. So, a sole-trader window cleaner might struggle but a sole-trader who buys and sells via the internet, potentially incurring significant amounts of paperwork, is likely to be okay.

If you have any doubts as to whether or not your business qualifies, I would suggest having a friendly chat with your accountant. It could save you aggravation and cost in the future if you get it wrong!