I look after a husband & wife business (Chartered Surveyor) run as a Partnership from their home.
Client has outgrown dining room office and is contemplating either building an office in the garden (ready made 'shed' office) or converting the unused double garage into a dedicated space - their preferred option.
I am interested in implications for claim back of VAT and what costs could be offset as an expense within the Partnership - for the building / purchase / conversion etc.
I am fully aware of the normal 'use of home as office' deductions including the potential pitfalls around capital gains and business rates but have a nice little excel sheet that does the computation at the end of the year, discounting an element for personal use.
Happy to hear opinions - VAT is probably more clear cut and my hunch is shed yes, garage costs no due to potential for dual use.....but I'll stop there and wait for your comments in anticipation!
Hello there Redfive. I hope that you are aware about the newest simplified home office deduction stated by IRS. Previously, complicated forms have made it challenging to claim a home office deduction with the Internal revenue Service. The tax bureau was quick to scrutinize these claims for difficulties. However, that process will be much easier when filing tax forms in 2014. Moreover, this rule will cause business's that use a lot of space and have workers come to the home to take a substantial cut in their deductions. I would bet that more companies rent outside offices and move themselves to a smaller house or apartment. This can be real bad on the bottom line which means more income and self-employment tax. Read more here
good to know that our readerfship of the site is so wide but tax and financial reporting are completely different over this side of the pond.
Don't know how I missed this one.... Oh, actually, I do, this was the time when there was the last big Bob arguement going on. Anyway, thanks for bringing it back to the top of the queue Johanna.
Redfive,
I have a client in a similar position and I'm pulling my hair out at the moment knowing that what I am being told (a log cabin in the garden that is to be a classroom) having seen others of these good intentions that end up 50%+ non work related extended house stroage area.
In answer to the question though, if the business buys a shed office in the garden then subject to the normal business use rules the VAT on the purchase is reclaimable.
The shed would not be attached to the house and when the house is sold the shed could be dismantled and moved so there would be no tax implications on using part of the main residence for business.
Converting the garage on the other hand means that a part of the house has pure business usage so on disposal part of the sale price (based on floor area) would be subject to capital gains.
Although your clients favour the garage conversion I would try to guide them towards the shed / log cabin option purely from the effect on the future tax consequences on sale of the main residence.
You also need to emphasise that this is not a storage extension from the house but must be treated totally seperately.
Note that there are implications here if your client is on a flat rate scheme as although the shell is likely to cost more than £2000 installed the other elements of the construction such as the instalation of electricity would not be (unless the whole package was sold as one service by the installers).
Also, your local council may be keen to charge business rates on the garden office. This is a double edged sword. It proves its business merit but costs you dearly for the privellage.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi there, I have read a recent news about home office deduction and hope this can help you. Taxpayers who work out of their homes have found it challenging in the past to calculate their home office deduction for the Internal Revenue Service. In addition, the deduction is well-known for raising red-flags with the tax bureau. However, the Internal Revenue Service says that procedure will be simplified and less cumbersome when filing taxes next year. Pay for your taxes with an << link to payday loan company website removed by moderator >> this year.
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-- Edited by Shamus on Tuesday 19th of February 2013 10:53:04 AM
