Shed in garden for a workshop

Tank40

I've been making stuff by hand to sell on in a shed (Self employed/sole trader). Recently upgraded it, basically used the base but the rest was new. Thought it would count as an asset and be treated as a capital allowance but apparently sheds in residential gardens don't count 
Could I put the cost down as an expense as the old shed was too small & damp?

Pennywise

Basic tax law is that you don't get tax relief on most kinds of "building" as it's regarded as a capital asset rather than an expense.

Basic tax law allows capital allowances on the purchase of equipment, but to qualify, the "building" must have a function over and above simply a shelter in which to do things.  Despite you using it to make/store things, it's passive rather than active and has no function other than being a shelter, so it doesn't qualify for capital allowances either.

So you can claim capital allowances on the equipment you put into the shed, i.e. shelving, workstations, and whatever equipment you use to make your products, but the actual structure/shell itself doesn't qualify.

You "may" be able to claim if you have services installed for the shed, i.e. water, electric, etc., as they've got a function and would usually qualify for capital allowances.

Tank40

Ooh, there is a permanent electricity supply run out to it, although I was going to include a small % of electricity bills

Savvy_Sue

Tank40 said:

Ooh, there is a permanent electricity supply run out to it, although I was going to include a small % of electricity bills

But I don't think that's what Pennywise said, I THINK that what they are saying is that you MAY be able to claim as a capital allowance if you put in an electricity supply where there wasn't one, or install water where there wasn't any. 

Yes, claiming part of the electricity bills is acceptable, but not as a capital allowance - and forgive me if that was quite clear to you. 

I am not an accountant ... but this strikes me as the kind of thing where talking to an accountant is well worth while, and has the potential to save you making a costly mistake as well as saving actual hard cash ... and if your business is growing then now would seem like the time to do it. 

J_B

If you have 'repaired' the existing shed, isn't that tax deductible?

diystarter7

If you have building insurance, you need to tell them if you have not already done so. IE using part of your property as a business.

TintedLemon

I believe that you can treat it as a tax expense if you have done work upgrading it, removing damp, basically making it a workable space. But I don't believe it would class as a capital allowance from what you have said, unfortunately.

Once that is done though, you should also be able to claim back on electricity costs as you said. 

I am no accountant though - you should talk to one - I am just speaking on my past experience )