Wednesday, January 13, 2021

Garden office tax planning: business ownership

In the third and final part of this excellent series by Helen Thornley, Technical Officer at The Association of Taxation Technicians on accountingWEB (see here for the previous two) she looks a a wide range of issues including structures and buildings allowance, VAT, and what happens when you come to sell your house. Here's a snippet, talking about 'benefit in kind':

One approach would be to view the pod as an asset which has been lent to the director and is available for their use, but to which legal title has not been transferred. If the pod does not fall within the special rules for living accommodation, then the general rules will apply. The HMRC view is that living accommodation is something that gives the occupant the necessary facilities to live domestic life independently without reliance on others to supply basic needs, so offices and workshops are excluded.

In this case, unless the pod is hired, the cash equivalent of the pod to be assessed each year as a benefit will be 20% of the market value of the asset when first made available – most likely the cost of the asset when new. This is likely to be more significant than the benefit in kind for living accommodation and, if the pod is to be kept long term, it might be better for the director who wants personal use to pay to install it privately. In the first tax year, this benefit can be apportioned so the individual is only taxed on the number of days since the pod was first made available.

As with previous blog posts, this is well worth reading.

Photo courtesy Warwick Buildings


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.


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