Home office at rear of garden

I have gone to my accountant with this question, but I would also like some learned wisdom from the AAM community to feed into the discussion.

I am a director of a limited liability company, working in IT (ranging from strategy, due diligence, roadmaps etc). Like many I have been worked flexibly for a number of years, including during the COVID years. However, recently I have moved to a fully virtual model, with very occasional visits to client sites. In some cases, the client is also fully virtual with no office space in Ireland.

Like a lot of people, I have 'surrendered' a room in my house as a dedicated office for the last number of years. This is no longer feasible and the room is needed as a space for the kids. It is the family home after all. So I need to find another 'reasonably private' working location at a reasonable cost to the company.

The idea of using a collaborative working space is not really appealing on the basis of cost and practicality. A standard 'office desk' does not private sufficient privacy to discuss client confidential information on regular virtual meetings, so would need to be more an office model. Based on initial quotes, the cost of this would be ~500 a month or 6k a year [South County Dublin], so a bit on the high side.

The alternative is to place a 'temporary' structure at the back of the garden [size less than planning requirements]. My assumption is the the limited company could pay for this and reclaim VAT, and depreciate it at a standard rate (say 10-12% a year). Once its no longer required, the company could dispose of it [either to a third party or to myself at market value], and handle the tax accordingly. I estimate the cost of this to be around 25k, less ~3k VAT, so net 22k. I expect to use this for ~15 years, so about 1500 a year. This assumes no disposal payment, which of course is unlikely.

Does anyone see anything wrong with the alternative proposal ? I want to stress I am not in any way trying to 'pull a fast one' here, but rather find a reasonable way to accommodate virtual working arrangements, without incurring a significant personal cost. I find the idea that I would personally pay 25k to install a home office in order to claim 3.20 euro a day remote working allowance to be nonsensical. I am sure this type of 'office/workshop' has been commonplace across many professions over the years - I am just not personally aware of associated guidelines.


On a side note - apologies for disappearing from the site over the last few years. Work has been a bit on the crazy side so didn't have time to engage in discussions.

Please note I have read this thread already but I am none the wiser after it

Financing Home Office from Limited Company

gnf_ireland said:

The alternative is to place a 'temporary' structure at the back of the garden [size less than planning requirements]. My assumption is the the limited company could pay for this and reclaim VAT, and depreciate it at a standard rate (say 10-12% a year).

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Might it be difficult to claim the structure is not intended for commercial use as required to avail of exempted development if the company is paying for it? I'd advice seeing a Section 5 Declaration before spending any money on this.

gnf_ireland said:

The alternative is to place a 'temporary' structure at the back of the garden

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What sort of temporary structure do you mean here?

It's a deceptively complex query. I'd personally be concerned about the respective risks of getting inadvertently entangled in VAT on Property rules, and doing harm to your PPR exemption.

I would get your accountant or yourself to send an email to revenue for advise on the tax situation.

As regards planning, it's better to stay away from the planning office. You'll only give yourself grief.

Bronte said:

I would get your accountant or yourself to send an email to revenue for advise on the tax situation.

As regards planning, it's better to stay away from the planning office. You'll only give yourself grief.

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Going to Revenue looking for advice on this would IMHO be a lot riskier than approaching the planning office.

I've looked at this approach and it doesn't fly easily. Best you could probably do is to look at home working allowance or proportion of utilities as per Revenue rules.

However... do you travel into client sites much? If so there can be tax advantages to renting an office space away from your home address, when it comes to travel and subsistence to client sites.

There do seem to be some companies selling garden offices that tell you you can buy a garden office via your company but they do have a vested interest.

Here is a view from an Irish specialist contractor accountant https://www.iconaccounting.ie/blog/building-a-home-office-what-is-claimable

Are you looking to build a home office to carry out your contract work?​

Below we go through what is tax claimable for a Personal Ltd Company when building a home office for carrying out your contract work

In order for the outlay to be claimed in the first place, the following requirements must be met:

1. The land you are building should be owned by the company
2. That the build is not seen as an addition or enhancement to the property
3. The building or extension is wholly and exclusively and necessarily used for the purposes of your business
4. The majority of your contract work must be from the home office

Please be aware that the capital purchase price of building a shed or extension to your home would not be an allowable tax deduction.

Fit out cost​

If you are building a home office exclusively for the purposes of your contract work, there may be some allowances you can claim once you can show it’s wholly and exclusively for your contract.

You can claim 12.5% allowance each year on the below items that are claimable for a maximum period of 8 years.

The following items may be claimable

1. Office furniture
2. Computer Equipment
3. Mobile Heating fans
4. Maintenance and Painting

The following items are not claimable

1. Roof
2. Groundworks
3. Fixed lighting
4. Windows
5. Renovations
6. Fixed flooring, e.g wooden floors

Operating Costs​

Once you are up and running in the home office you may be able to claim the following running costs:

1. Telephone
2. Broadband
3. Light & Heat (Apportionment)
4. Upkeep of office
5. Software costs
6. E-worker allowance of €3.20 per day
7. Insurance costs

You also may claim full tax relief on the above when you can show they are wholly and exclusively required for your business. Where the full amount is not claimable (like Light and Heat ) then you must come up with an apportionment.

Rent​

1. If you own your home and your company is paying you rent, then the rent is taxable in your hands and you must declare to Revenue, there is no tax advantage to this
2. If you are renting the property and you wish to claim a portion of your rent, we advise that your apportionment is accurate to the amount of work that you are carrying out at home, Revenue would not allow a deduction against incidental work rather you would need to be working full time from the property and have a robust method of apportionment along with correct paperwork from the Landlord

Rates & Planning​

If the office building is used solely for business, then technically you may need planning for change of use and therefore have to pay rates. If the office is of mixed use, you will not need need planning.
Ultimately this will be up to the Valuation office to decide, so therefore if building we suggest you take legal advice.

Capital Gains tax​

Where an employee uses part of their home for work purposes, the CGT exemption for Principle Private Residence will not be affected.

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Why not fund the temporary' structure at the back of the garden yourself, as you own the site it is going on.
Then rent it out to your Limited Company.

5thwheel said:

Why not fund the temporary' structure at the back of the garden yourself, as you own the site it is going on.
Then rent it out to your Limited Company.

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You'll then have to pay tax personally on the rent received from the company.

How do other buinesses that conduct their business on their residential property handle this? Think about a doctor who's surgery is located in his home or a shopkeepr/publican who live at the back of the shop/pub. There must be precedence for this type of arrangement too.

Maybe that' a mixed use planning topic rather than a revenue topic. Refer to PPR sale CGT risk mentioned earlier.

Thanks everyone for your time to respond to this. I had a feeling it was not going to be straight forward. I wonder how this will evolve in the coming years when people decide that working from their bedroom or kitchen table has lost its appeal and more companies have gone more or less fully virtual.

I guess I am back to the higher cost option of renting an office space for my needs - we genuinely don't like to make things easy for ourselves in Ireland at times. Anyway I will wait and see what my accountant comes back with !

Why not rent a desk (cheaper than an office) and then work from home anyway?

outofmymind said:

Why not rent a desk (cheaper than an office) and then work from home anyway?

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Because I want reclaim the current room I am using in my private residence as my office for the last 4 years [provided free to the company] as the family space it was always intended to be used for - meaning the home working option becomes the kitchen table, or a temp desk under the stairs or in the bedroom etc, but to me none of these are suitable workspaces. They were fine as 'emergency' options during COVID, but not any longer in my view.
I spend ~9/10 hours a day working - I need to be in a comfortable environment for it.

Would this arrangement mean you would have to pay rates on the property?

T McGibney said:

Going to Revenue looking for advice on this would IMHO be a lot riskier than approaching the planning office.

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I'd rather not be in trouble with the Taxman than the planning office.

Bronte said:

I'd rather not be in trouble with the Taxman than the planning office.

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You stand a better chance of doing the former if you follow their "advice", which they'll readily disclaim at the earliest opportunity if and when it suits them.

T McGibney said:

You stand a better chance of doing the former if you follow their "advice", which they'll readily disclaim at the earliest opportunity if and when it suits them.

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How do they disclaim their advice if you have it in writing from them?

Bronte said:

How do they disclaim their advice if you have it in writing from them?

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Because they say (correctly) that they have not tax advisors and have no duty of care towards taxpayers in terms of minimising tax liabilities.

Besides, look at anything they issue in writing, including Tax Clearance Certs and CGT Letters of No Audit. These will always carry some form of disclaimer or qualification.

gnf_ireland said:

Because I want reclaim the current room I am using in my private residence as my office for the last 4 years [provided free to the company] as the family space it was always intended to be used for - meaning the home working option becomes the kitchen table, or a temp desk under the stairs or in the bedroom etc, but to me none of these are suitable workspaces. They were fine as 'emergency' options during COVID, but not any longer in my view.
I spend ~9/10 hours a day working - I need to be in a comfortable environment for it.

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Sorry to revive an old thread OP, but did you go with the office at the rear of the house? We have a similar situation, using part of the house is not suitable any longer, and we are looking at a garden room or maybe an attic conversion. Just hoping to hear of others experiences.