Home Office – Allowable Business Expense?

bpk101

I'm just gathering my statements together (Earnings and Expenses) for the 2019/20 tax year and had a question regarding allowable expenses.
During this tax year my wife and I added a loft extension to our home, the build took place between April and June 2019.  
The loft consists of 1 x bedroom, 1 x shower room and an office and i've used the office pretty much exclusively to work out of since the build was finished. I'm a self-employed designer. 
Is the cost of the office build an allowable business expense and if so, how do i calculate the cost of it given it's one of 3 x rooms built as part of the overall extension?
In addition are the office furnishings (desk, chair etc.) allowable expenses too?
Thanks.

Jeremy535897

Capital costs of offices do not qualify for tax relief, except for certain items that count as plant. It is a complex area. See https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca22010  In reality I doubt it is worth even considering.

Movable items of office furniture like desks etc qualify for capital allowances. You can claim the business proportion. You say the office is used "pretty much exclusively" for business, so you might claim say 90%. Be aware that if you claim a room is exclusively for business purposes, you lose main residence relief for capital gains tax on it. You also need to consider whether there are any planning restrictions or restrictive covenants on the property that might prevent such usage.

bpk101

Thanks! What is 'main residence relief' though? The room is a study and is used for business purposes only. 

Pennywise

bpk101 said:

Thanks! What is 'main residence relief' though? The room is a study and is used for business purposes only. 

Main residence relief is for capital gains tax on your home.  If you use your home wholly as your home, then it's exempt from CGT, but if part of your home is used wholly for business, you don't get CGT relief on that part.  For most people who use only a small portion of their home for business it won't matter as the gain on that portion will be exempt under the annual exemption or by virtue of time it was used for the home (i.e. a spare room that was used as a child's room for 20 years and then as an office for the last few years).  So, something to be aware of especially if the office is large.

oldbikebloke

in VERY simple terms, if 1 room in an 8 room property is used WHOLLY AND EXCLUSIVELY for business purposes then 1/8 of the increase in value of the property (selling price minus purchase price minus CGT allowance) will be liable to Capital Gain Tax 

Also, depending on how desperate for tax your local council is, they would, in the above circumstance, be perfectly entitled to ask the Valuation Office Agency (VOA) to assess that room for business rates, which you would then need to pay in substitution of any council tax you already pay on that 1/8 of the property. (Note: business rates are > council tax per square foot of property)

Jeremy535897

oldbikebloke said:

in VERY simple terms, if 1 room in an 8 room property is used WHOLLY AND EXCLUSIVELY for business purposes then 1/8 of the increase in value of the property (selling price minus purchase price minus CGT allowance) will be liable to Capital Gain Tax 

Also, depending on how desperate for tax your local council is, they would, in the above circumstance, be perfectly entitled to ask the Valuation Office Agency (VOA) to assess that room for business rates, which you would then need to pay in substitution of any council tax you already pay on that 1/8 of the property. (Note: business rates are > council tax per square foot of property)

I would have thought it unlikely that a room in a house would have a rateable value exceeding £12,000 (I doubt OP has any other business premises, unless they have a holiday cottage perhaps), so SBRR would cancel any assessment..