Friday, March 12, 2021

Garden office boom, tax holidays and headaches

The boom in garden offices can create tax holidays and headaches when homeowners choose to sell, according to tax expert Natasha Heron from chartered accountants and tax advisers Hillier Hopkins.

“Sellers, buyers and their estate agents often fail to realise that a garden office if it meets certain criteria can lead to quite substantial savings for stamp duty land tax under what is called multiple dwellings relief," says Heron, who adds that multiple dwellings relief will usually see stamp duty land tax charged not on the total sale price of a home but on the sale price divided by the number of properties acquired regardless of their size or value, and that can represent a significant saving.

“The relief does, however, come with strict qualifying criteria, with a garden office needing to be independent from the main house and with its own cooking facilities and bathroom. Independent does not necessarily mean detached, but attached garden offices, or granny annexes, will need a separate entrance. Savvy sellers can use this relief to increase the sale value of their home, sharing the reduced stamp duty land tax liability with buyer.”

But warns Heron, business owners that have funded a garden office through their business could face an unexpected capital gains tax bill.

“Garden offices can add significant value to a property and consideration is required if that space is classed as a business asset. Capital Gains Tax (CGT) does not usually apply to your primary residence when you sell it. However, it may apply if part of your residence is used solely for business. Business owners will need to keep a watchful eye particularly is a sale is on the cards any time soon.” 

As always on Shedworking, we strongly advise talking to your tax adviser/accountant about all matters relating to your tax.

Image courtesy Plankbridge


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