My office, a business expense?

Q. I am an IT Contractor based at home and need an office space to separate my home and family life (aka noise). I would like to build a (temporary) office building in the garden. My accountant tells me that I would have to pay for this out of my personal account as it can not be classed as a business expense. Other friends and colleagues of mine have been advised differently and have built and paid for them from their business accounts. I am hoping that you may be able to advise which of these is correct.

A. The guidelines set out by HMRC pertaining to a home based office are pretty clear, with that being said, both sets of advice you have been given are near enough correct.

The ruling is as follows; the actual construction of the shell which is built with the intention of it being occupied as an ‘office’ is a disallowed expense, the logic behind this criteria is that an outer office can have many eventual uses, i.e. if you ceased contracting, you may decide to turn the ‘office’ into a kids play centre however you will have received 100% tax relief on the building. Furthermore, let’s not forget the commercial implication it will have if you were to ever sell the property.

If not the building, what can you claim?

You can claim the all that goes into the property which makes it a ‘purpose build office’, the list below is not exhaustive but will give you an idea of the genre of expenses allowable;

  • Insulation
  • Tiling
  • Air con
  • Furnishings
  • Security system
  • IT equip
  • General décor

You may find many individuals who opt to claim the cost in its entirety including the cost of the building, but this choice can result in a severe detrimental tax implication if ever challenged by HMRC.

This answer was provided by QAccounting.

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