Does a garden office count as a business expense?

Oct 27, 2021 | Business, HMRC

Living through the pandemic has changed the ways in which we work forever. Homeworking has become the norm for millions of people, but not everyone has the space for a designated home office.

When you consider one in eight UK households have no garden, it’s easy to imagine patience is running thin when it comes to working in a spare room at home or on the dining room table.

For others fortunate enough to have some outdoor space at home,  building a garden office is one option many directors are considering.

Depending on the type of garden office you go for, this could set you back between £15,000 and £30,000. The question some people ask us is “will this count as a business expense?”

The short answer is “yes”, your business can pay for your home office. But you won’t get the full corporation tax deduction you might expect. And when you sell, you’ll need some advice.

Can you recover VAT?

Firstly, your company will only be able to recover the VAT for building a garden office if it’s VAT-registered. Any business with taxable turnover of more than £85,000 in a 12-month period must register for UK VAT.

Secondly, it depends on which VAT accounting method your business uses. If you use cash accounting or annual accounting, it’s certainly much easier to recover certain costs involved with a garden office.

It’s possible to reclaim the purchase price and the costs of installing its contents, such as electrics, plumbing and heating. However, this becomes much more complex for companies using the flat-rate scheme.

What happens if I move house?

When you sell your main home, private residence relief usually kicks in to ensure you pay no capital gains tax on the sale. Stamp duty land tax will, however, be due when you purchase your new home.

Capital gains tax might apply if part of your residence – the garden office – is solely used for business. That’s because if your property’s equity grew due to the garden office, relief will apply only to the home.

For example, if the office covers 5% of your main residence’s total floor area, 5% of the gain might be liable for capital gains tax upon completion of the sale.

What’s the deal with council tax and business rates?

In 2021/22, council tax for part of the home office used for domestic purposes will remain payable at the band you fall into with your local authority.

Garden offices and business rates are currently a bit of a grey area. You might become liable for business rates if you make changes to your home, such as building a new structure or converting an existing one.

For both council tax and business rates, it would be a wise idea to check with your local authority before you get the contractors in to start work on the garden office.

You can also talk to us for a full picture of the tax implications involved with building a garden office. Get in touch with us today.

It’s easy to choose us as your accountants

Whether you’re getting your first business accountant or switching from another firm we’ve perfected a process that makes signing up feel simple.

First, get in touch with us

Establish what you need


We’ll agree fees and terms

We'll handle any switch

Fast, easy onboarding


And you’re ready to go

team on stairs