If your business has outgrown the spare room and you are looking to expand then one of your options is setting up an office in your garden.

There will be another blog to follow this one, that will cover the business tax position.

What about VAT?

If your company or self-employed business is not VAT registered then the VAT cannot be recovered.

If you or your company is VAT registered then you may be able to recover the VAT…

Whether you can recover the VAT depends on your sales.  If all your sales are subject to VAT (at whatever rate) then you can recover the VAT on your garden office in the same way that you can recover the VAT on your normal office expenses.

If some but not all of your sales are subject to VAT then you are a “partially exempt” trader.  How much of the VAT you can recover will depend on your partial exemption calculation and you should contact your accountant for advice.

If none of your sales are subject to VAT then you cannot register for VAT, so the VAT cannot be recovered.

Someone mentioned the “option to tax”, is that relevant to me?

The simple answer is:  NO

The “option to tax” is an election that a landlord can make when the property is rented out (to you or your company).  It allows your landlord to recover VAT on all of his (or her) expenses.  As you are trading and making sales subject to VAT, you do not need to make an “election to tax”.

I use the Flat Rate Scheme, so how do I get the VAT back?

When you use the flat rate scheme you calculate the VAT you owe to HMRC as a flat percentage on your VAT inclusive sales.  The flat percentage varies depending on what your business does.  See our blog to see if the flat rate scheme could benefit your business.

You should be able to claim back the VAT on your office purchase as it will have a VAT-inclusive price of £2,000 or more.  The claim is made by putting the VAT you were charged in Box 4 of your VAT Return.  There are certain rules for claiming back VAT when you buy capital assets and you should contact Clearways Accountants on 01737 244298  or your own accountant for assistance.

This is the Clearways Accountants new office, image courtesy of Phil Hawkins