Building a Garden Office with Ltd Company?

musicformedia

Hi guys, I'm getting a lot of different information on this and would be really appreciative of any advice you can give.

I have a Ltd. company. I'm looking to build an office in the back garden which is around 26k. It will only be used by the business. I have enough money in the business to pay for it in cash.

- Can the entire amount be written off against the business including the VAT?
- How quickly can it be written off against the business? My accountant has advised me "you will only be able to claim the cost of the building through capital allowances against profits at 4% per annum (25 years)". Others have told me that it can be written off over 6 years?
- Would I be better off getting a business loan to pay for it instead of using cash from the business?

Lockedout2

The construction of an office does not in itself qualify as an expense.

Items that qualify for capital allowances like office furniture, computers ect are written down over 8 years.

You won't get a deduction for 26k if that's what your asking.

musicformedia

Lockedout2 wrote: »

The construction of an office does not in itself qualify as an expense.

Items that qualify for capital allowances like office furniture, computers ect are written down over 8 years.

You won't get a deduction for 26k if that's what your asking.

Ah dang, that's annoying. So say you have 50k in profit sitting in the company. 26k is spent on the construction (say nothing is spent on furnishing or machinery etc.). At the end of the year, your corporation tax is still 12.5% of 50k (even though you only have 24k in profit left in the company). Is that right?

Thanks so much

MarGar

A suggestion that might be worth exploring:
- is keeping the office in your own personal name.
- then get a personal loan to finance the purchase or building of the office
- rent the office to the company
- you can use the interest on the loan as a deduction and any other expenses related to the property - furniture etc. as a deduction
- the rental paid by the company can be used as a deduction in the company accounts.

viztopia

musicformedia wrote: »

Hi guys, I'm getting a lot of different information on this and would be really appreciative of any advice you can give.

I have a Ltd. company. I'm looking to build an office in the back garden which is around 26k. It will only be used by the business. I have enough money in the business to pay for it in cash.

- Can the entire amount be written off against the business including the VAT?
- How quickly can it be written off against the business? My accountant has advised me "you will only be able to claim the cost of the building through capital allowances against profits at 4% per annum (25 years)". Others have told me that it can be written off over 6 years?
- Would I be better off getting a business loan to pay for it instead of using cash from the business?

Where is your accountant getting the 4% from?

scheister

viztopia wrote: »

Where is your accountant getting the 4% from?

i would imagine he is thinking of industrial building allowance. This allowed certain building to be written off over 25 years as capital allowances

what recession?

How is this going to work if you own the garden and the company owns the office structure?

When you sell the house, are you going to pay the company its 26k back as you have also sold its office in the process? Are you going to charge the business ground rent?

MarGar's suggestion of paying for it yourself and charging the company rent seems like the sensible option to avoid potential issues.

the goon

MarGar wrote: »

A suggestion that might be worth exploring:
- is keeping the office in your own personal name.
- then get a personal loan to finance the purchase or building of the office
- rent the office to the company
- you can use the interest on the loan as a deduction and any other expenses related to the property - furniture etc. as a deduction
- the rental paid by the company can be used as a deduction in the company accounts.

+1

musicformedia

the goon wrote: »

+1

Thanks for the responses everyone. I think there might be one more option maybe?

I have both a limited company and work as a sole trader. Both will be using the garden office. Both are VAT registered.

Would getting a business loan as the sole trader work best maybe? That way the sole trader "owns" the office. The sole trader is able to claim the VAT back.

I could then use the company to pay for the furnishings.

Would that possibly be the best solution?

CIARAN_BOYLE

musicformedia wrote: »

Thanks for the responses everyone. I think there might be one more option maybe?

I have both a limited company and work as a sole trader. Both will be using the garden office. Both are VAT registered.

Would getting a business loan as the sole trader work best maybe? That way the sole trader "owns" the office. The sole trader is able to claim the VAT back.

I could then use the company to pay for the furnishings.

Would that possibly be the best solution?

Be sure to remember that if you are building a property and claiming VAT on the materials when you dispose of it you will have to charge VAT as a seller.

Talk to a specialist who VAT on struction aware.

nino1

https://www.boards.ie/discussion/comment/100875228#Comment_100875228

Sorry from bring up an old thread but i am in a similar situation.

In the above example if you took a personal loan for €26k you would be paying back around €822/month over three years.

So I assume you would have to charge the company €1650 rent per month as this rental income would be subject to higher rate of tax

resulting in €822 net to cover the cost of the loan repayments.

Aside from the fact that you can expense the interest from the loan and the furniture, its not much more beneficial than just paying yourself

a wage of €1650 per month.

Is there any better or more efficient way of doing this?

Also read up on the impact on principal private cgt relief when you come to sell.

You will lose a portion of this tax relief if you create a paper trail (this being the key distinction to watch out for) that you are using your house and up to one acre (limit of the relief) for business use.

working from home does not impact this relief but if you formalise it and start charging a company rent / utilities etc then you are risking losing a % of the relief