Readers questions: As a limited company, can I put garden groundworks (path and patio) through the company? I am now working from a garden office and this work would provide access.
Using your limited company to pay for the costs of putting in garden groundworks would be considered as capital expenditure. Capital expenditure is money spent by your business that goes into acquiring, maintaining/repairing, or upgrading physical long-term assets such as buildings and equipment. This is very normal spending for many businesses and means there is no reason why you cannot legitimately do this.
However, there are several tax considerations to be aware of, which may dissuade you from paying through your limited company:
Firstly, the cost of construction of the garden groundworks will not qualify for capital allowances. Although capital allowances are available on structures and buildings, it does not apply to those which are residence or located on the grounds of the residence. Capital allowances permit you to deduct the expense from your company profits, thereby helping to reduce your corporation tax bill. This saving will not be available in your case.
Capital Gains Tax
Secondly, where you do not qualify for tax relief in the year the expense was incurred, you may instead be able to offset the cost against future capital gains tax (CGT). This option will only become available when you come to sell your home and therefore you could not recover the costs of the groundworks until then. However, you would not normally even attract CGT in the first place when selling your main residence. This is likely only to occur where you use any part of your home exclusively for business and is therefore rarely advised.
Personal use of assets
Finally, here you do have a business asset that has any personal use, such as using your patio for BBQs or letting your kids play on it, it is likely to constitute a taxable benefit-in-kind. In this circumstance, you may need to complete a P11D and pay income tax on the benefit. An added difficulty may arise when it comes to valuing the benefit in order to determine how much tax should be paid. This could lead to further costs such as getting a formal valuation.
In conclusion, you are able to put the costs of your garden groundworks through your limited company as capital expenditure, however, this would not be recommended by accountants. There are no financial benefits to doing so and rather would attract more tax liabilities as an outcome.
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