Building Garden Office - Do it as Sole Trader or Ltd. Company

[flyingfolly]

Hi guys,

I'm about to start building a garden office in the back garden of my house. Its under the limit of planning permission.

I run two businesses - one as a sole trader and one as a Ltd. company. Both will be using the office.

Which would be the best way to fund the building and furnishing of the office? I was advised that its not able to be written down as capital expenditure by the Ltd. company and there would be issues with a company owning the office in garden if we were to sell the house.

My thinking is the following (would love to know if you think this is the best way to do it):

- Get a loan for the sole trader business
- The sole trader builds and owns the office (claims back VAT)
- The company pays for the furnishings of the office

I'm hesitant to go down the route of trying to get a "personal" loan rather than do it through the business as we've only just got our mortgage so I don't think they'll approve another loan so soon.

Any ideas/thoughts?

 

[Joe_90]

Why prey tell do you have two VAT registered businesses?

A sole trader loan is a personal loan! Will you be able to pay back the loan out of your sole trader business or will you need to charge a rent to the company beware of VAT clawback if the company does not have 100% recovery.

 

[flyingfolly]

Good question. Theyre both different businesses but both in the same sector. I have the artists exemption so that applies to my sole trader business. The turnover has exceeded the vat registration limit so I had to register it for VAT. The Ltd company is also VAT registered as it also exceeded the threshold. It's not an issue to have two VAT registered businesses is it?

Didn't realise sole trader loan was a personal loan but that does make sense actually

Paying for it as sole traders makes more sense though right?

 

[Leo]

I'm about to start building a garden office in the back garden of my house. Its under the limit of planning permission.

Your proposed use means this does not fall within exempted development. Full planning permission is required.