Rise in garden offices could create tax holiday issues

The rise in garden offices could create tax holidays and headaches when homeowners choose to sell according to accountants, Hillier Hopkins.

The COVID-19 pandemic has seen an increase in garden offices as employees have been required to work from home.

Hillier Hopkins believes that the rise in garden offices is likely to continue.

The accountants outlined that garden offices can also come with a Stamp Duty Land Tax holiday or a Capital Gains issue when a homeowner decides to sell, which estate agents often overlook.

Multiple dwellings relief will usually see SDLT charged not on the total sale price of a home, but on the sale price divided by the number of properties acquired regardless of their size or value, and that can represent a significant saving.

Natasha Heron, a tax manager specialising in property taxes at Hillier Hopkins, said: “Sellers, buyers and their estate agents often fail to realise that a garden office if it meets certain criteria can lead to quite substantial savings for stamp duty land tax under what is called multiple dwellings relief.

“The relief does, however, come with strict qualifying criteria, with a garden office needing to be independent from the main house and with its own cooking facilities and bathroom.

“Independent does not necessarily mean detached, but attached garden offices, or granny annexes, will need a separate entrance.

“Savvy sellers can use this relief to increase the sale value of their home, sharing the reduced stamp duty land tax liability with buyer.

“Garden offices can add significant value to a property and consideration is required if that space is classed as a business asset.

“Capital Gains Tax (CGT) does not usually apply to your primary residence when you sell it.

“However, it may apply if part of your residence is used solely for business. Business owners will need to keep a watchful eye particularly is a sale is on the cards any time soon.”