As home working looks to be here to remain, more and more people are asking about the tax implications of building a headquarters. very similar to tons of answers when it involves tax, the solution isn't simple.
Let’s assume you're working through a Limited company and you're considering either building a headquarters by either extending or building a garden office, or converting a garage or other room into a permanent office. there's a sophisticated area and there are tons to think about so we recommend getting in touch with cheap accountants in London before acting. The course of action you're taking can have implications on corporation tax, tax, BIK, VAT, and CGT.
Corporation Tax
First of all, it's our opinion that you simply aren't ready to deduct the value of building new office space from corporation tax. Businesses weren't, in fact, ready to claim any capital allowances on building works until HMRC introduced Structures and Buildings Allowances.
In the world of tax, there's a difference between renovations and enhancements. Repairs are tax-deductible whereas improvements aren't so bear this in mind once you are planning works.
Also, there's tax relief for the value of fixtures, fittings, and furniture. there's also a relief for thermal insulation. For the avoidance of doubt, a shed is going to be deemed a structure and not allowable.
Income Tax / BIK
I have explained the impact of paying for renovation or capital works through your Ltd. on corporation tax. The subsequent question Is how it impacts your own personal liabilities. If you're deemed to profit from the works done, there could also be a benefit in similar way implications which might end in liability to tax. The benefit might be from the use of the office or alternatively, it could come from a rise in the value of the property of your own.
CGT
A principal residence is absolved from capital gains tax. this could apply to your headquarters as long as there's no part of the home is used exclusively for business purposes. If you change a part of your house into a fanatical headquarters, you would possibly have issues here when it involves selling your house.
As you'll see there's a touch of trap herein that one rule requires forbids you personally benefitting whereas another rule forbids exclusive business use of the space so please get in-tuned with us if you'd like us to seem at the specifics of your case.
VAT
If your Ltd. is VAT registered, then you'll enjoy having the ability to recoup the VAT on the prices of any building work administered. Please note that if there's personal use of the office you'll not be ready to reclaim the whole amount of VAT paid. we will assist you arising with a percentage of VAT which will be reclaimed.
It is also worth mentioning that if you employ flat rate expenses then the treatment will vary counting on the value and nature of the work administered.
Business Rates
If you've got decided to create a headquarters on your property, it's also worth contacting your council first to seek out any planning implications. it's especially worth doing this if you propose to possess employees on-site before your neighbors complain. If you modify the character of the property, you'll incur business rates within the future.
Using your home for business purposes may be a tricky area when it involves tax given the combination of private and business usage and personal ownership versus company usage. We recommend that workers who are claiming headquarters expenses through a Ltd. draw up a contract between themselves and therefore the Ltd. to permit them to say a deduction on the value of a headquarters . These contracts aim to balance your situation with what's allowable by HRMC.
Get in-tuned if you'd wish to discuss your personal situation and that we can see how you'll minimize your liabilities with any works you're thinking of doing.
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