A garden office is treated for accounts and tax as a capital asset (and not as a business expense).
Capital assets purchased for your business, either as self-employed or Limited Company business, are not deducted against profits – instead the purchase may qualify for capital allowances.
Capital allowances vary depending on the value and the type of asset purchased and you may be able to claim an allowance of 100% of the costs against your business tax profits.
Tax is complicated and this is a complicated area!
Is your home office permanent?
If your home office is a permanent structure that cannot be taken down, so for instance a brick built office, then your garden office will be considered a “structure” for tax. As a structure your basic office costs will not be eligible for any capital allowances. The basic costs will include walls, ceilings, floors, windows and doors.
If your home office can be moved?
Even if moving the office would take a couple of days to take down and reconstruct the office will not be considered a “structure” and you may be able to claim capital allowances.
What allowances are available?
Your home office needs to fall within the definition of plant to qualify for capital allowances. If the total cost of the office is less than £250,000 (for the two years commencing 1 January 2013) and it qualifies as plant then you will be able to claim 100% of the cost of your office as a capital allowance deduction against tax.
Your accountant or Clearways Accountants can help you determine what allowances are available to you.
Even if your basic garden office costs do not qualify for capital allowances you will be able to claim allowances on all the other costs such as desks, filing cabinets, IT equipment and printers.
This is my new office, image courtesy of Phil Hawkins