Financing a garden office for a limited company

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wildeoscar

Registered User
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Hi folks,
I'm considering buying a garden room which will function as a home office. I own a limited company along with another company director.
I'm considering how best to finance this purchase.
1.) If I purchase this via my company, it will help with costs given VAT is 13.5% on the garden room. However this would then be a company asset in my garden. Can this be transferred to me personally at some point in the future? Curious to know what others have done in this situation.
2.) If I choose to purchase it myself outside of the company, could I then charge the company rent for my use of the office? I'd of course need to talk to my accountant on the tax implications of same, but again - interested in what others have done.

Given the current strange times we live in, I'm sure this is going to become more and more common.

Thanks.
 
Why don't you do what every one else does. Buy the thing out of company funds and charge the company rent.
 
cremeegg said:
Why don't you do what every one else does. Buy the thing out of company funds and charge the company rent.
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I don't think you can do that - why would the company charge itself rent on a property it owns? Wouldn't that be rental (non-trading) income for the company and be taxed at a higher rate than trading income?

What most people do is buy the office with their personal funds (where ever you get them from - maybe a loan from the company?) and lease them to the company. The rent paid which would be tax deductible for the company
 
Buy it through company, so its a company fixed asset.
Depreciate it at say 20% so in 5 yrs its worth zero (net book value of 0% of what company paid for it).
Then dispose of the asset to your self for the NBV amnt of zero.
 
jim said:
Buy it through company, so its a company fixed asset.
Depreciate it at say 20% so in 5 yrs its worth zero (net book value of 0% of what company paid for it).
Then dispose of the asset to your self for the NBV amnt of zero.
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So, ignore most tax rules? Happy days!

Keep a bit of money aside for the day the tax audit comes...
 
What tax rules are being broken?
Buy through company, pay vat.
Sell an asset that has a low or no nbv, no cgt.
What tax does the buyer have to pay?
Genuine question, perhaps im jus been stoopid
 
@jim
It basically all ignores correct tax treatment.

Sale of a company asset to a director? Company would make a profit between NBV & market value, paying corporation tax. Director pays tax if they receive a benefit for free.

Add to that, company can't build on land it doesn't own.

And I'm ignoring VAT aspects here. And the fact you can't write off an asset over 5 years
 
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Be aware that if you sell your house, you'll be charged capital gains on the increased value of your house due to the garden office. I chose to build mine as a sole trader instead based on this (I'm a sole trader and have a company too)
 
thanks for all the replies folks - looks like it's even more ambiguous than I originally thought!
 
RedOnion said:
@jim
It basically all ignores correct tax treatment.

Sale of a company asset to a director? Company would make a profit between NBV & market value, paying corporation tax. Director pays tax if they receive a benefit for free.

Add to that, company can't build on land it doesn't own.

And I'm ignoring VAT aspects here. And the fact you can't write off an asset over 5 years
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Interesting. It has been suggested to me by multiple individuals (none of whom are tax experts!) that buying through the company, depreciating the asset over 8 years is a common practice for purchasing a garden room.
Sounds like you're saying this is NOT something I should do.
What do you think I should do?
 
RedOnion said:
Is it a permanent type building, or a barna shed?
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I'm considering two types:
Type 1: Timber frame structure - non portable - but not permanent (i.e. it's not a block built structure that appreciates in value over time - it does depreciate and has a 10-15 year guarantee and a fixed usable shelf life)
Type 2: Galvanised steel structure which is portable (and also not permanent). Longer shelf life (25 yrs) but also not considered a permanent block built structure.

The other type I've not considered at all (as it's most likely a lot more expensive) would be a block built permanent structure.
 
Ah, if it's a depreciating asset that's different.
Still can be a nightmare transferring a company asset to a director. Tax treatment will be based on market value, not book value.
And there are company law aspects to cover.
 
I appreciate now that this isnt as straight forwars as I had thought.
I take your point that tax treatment based on market value not nbv.
I dont see the issue with depreciating at 20%.
Can a company not dispose of an asset to a 3rd party ie wife or brother of director?
What are the vat implications?
Company wouldnt be building on land it doesnt own, was my understanding. Its a garden room, you dont build it per se with planning permission required.
 
Hi Oscar

I think it's better to keep your tax affairs as clean and simple as possible.

Don't mix up your personal affairs with your business affairs for comparatively small items.

If you buy a premises for your company, by all means do a bit of tax planning.

But for a garden shed, it's not a good idea. When you have a Revenue Audit , you want everything to be as clean as possible.

Brendan
 
If its done right though and is compliant with tax rules and saves you money happy days
 
RedOnion said:
Really?
So, accelerated capital allowances?


Comply with rules? Like transferring to a 3rd party?..
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Depreciation is a complete red herring in this whole discussion. I’m pretty sure he’s talking, at all times, about book depreciation, whereas I’m pretty sure you’re talking, at all times, about what actually matters, tax depreciation.
 
Brendan Burgess said:
Hi Oscar

I think it's better to keep your tax affairs as clean and simple as possible.

Don't mix up your personal affairs with your business affairs for comparatively small items.

If you buy a premises for your company, by all means do a bit of tax planning.

But for a garden shed, it's not a good idea. When you have a Revenue Audit , you want everything to be as clean as possible.

Brendan
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Thanks for your input Brendan!
It's a bit more than a garden shed (cost would be EUR25,000 approx.). Given VAT is 13.5% it would mean a significant cost saving to purchase via the company rather than from personal funds - hence my line of enquiry. It would be used almost exclusively as a company home office.
But I was hoping this would be a reasonably straightforward transaction - from the replies here it's not looking that way! So perhaps it is best to just take the VAT hit and purchase it personally.
 
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