Wednesday, December 16, 2020

Garden office tax planning: personal ownership

This great little series looking at tax and shedworking by Helen Thornley, Technical Officer at The Association of Taxation Technicians, continues on accountingWEB with Helen's looking at running costs, rental charges, expense recharge, and private residence relief (among other issues). Here's a snippet about capital gains tax:

Where the pod has any private use, that should avoid a restriction on private residence relief (PRR) for capital gains tax, when the individual comes to sell their home with or without the pod.

This CGT relief is denied on any part of a dwelling house which is used exclusively for the purposes of a trade or business (s224(1) TCGA 1992). Where there is such exclusive use, then the gain relating to that room or area needs to be apportioned out and tax charged. The same principle applies to any free-standing structure like a pod in the garden of the dwelling and the land on which it stands.

Provided that the new home office is not used exclusively for work purposes PRR should not be restricted. While the test of ‘exclusive’ business use is quite high, the HMRC manuals do suggest that occasional or minor private use is insufficient to avoid the PRR restriction and it expects to see regular residential use.

There is unlikely to be an issue where the pod doubles as a play room, or has a sofa and television in the office to watch TV with (or away from) the family, or contains gym or craft equipment – pods can be put to lots of other purposes outside working hours.

Image courtesy eDEN Garden Rooms


Wednesday’s posts are sponsored by Norwegian Log Buildings  - Log cabins and garden buildings for a better quality of life. Click here for more details.

No comments:

Post a Comment