Are garden rooms VAT exempt?
All garden buildings have a VAT of 20% however this can be claimed back depending on the use of your garden building. In regards to the questions, are garden rooms VAT exempt? It depends on a number of factors.
Many people purchase a garden building to be used as a home office and a space to work away from the family with limited distractions. When a garden building is used for business purposes you may be able to claim back VAT depending on the circumstances.
What is VAT?
We have all heard of VAT. However, we may not know what VAT applies to. VAT is also known as Value Added Tax. VAT is a tax applied to the purchase price of certain goods, services and other taxable supplies purchased and sold within the UK.
Can I reclaim?
Reclaiming VAT off your garden buildings is possible, and there are no restrictions to the amount of VAT you can claim back as long as you meet all eligibility requirements.
When a garden building is used for the purpose of a home office, you may be able to claim back VAT costs. However, you must be registered with VAT and not using the Flat Rate VAT scheme to be able to claim your money back.
Depending on the use of the garden building, there may be some complications. For example, if the garden building is not used for office use only then, there can be a limit on the amount of money you can claim back. However, your garden building may be used on the weekends for personal use, for instance, as an area for the children to play or for the family to relax and watch a movie. Then, you will need to work out the pro-rata personal and business usage; this means that if your garden building is used as an office during the week and used for personal use on the weekends, you will be able to claim back 5/7 of the VAT tax you were charged.
Flat rate VAT scheme
The flat rate scheme allows you to claim on expenditure on goods over £2000 with no restrictions to personal use.
One complication is that you would only be able to claim back on goods, not services. So, for example, when it comes to a garden building, it is classed as goods; however, when installed by someone else, it becomes a service, and VAT will not be able to be claimed back.
Residential and personal use.
Those purchasing a garden building for residential or personal use commonly ask if garden rooms are zero-rated. Unfortunately, the answer is no, and garden buildings are not zero-rated. Garden buildings have the same VAT of 20% as any other product you purchase from the shop.
How to claim VAT back
There is a possibility you can claim back VAT on goods and services used only by your business. However, you cannot reclaim VAT on goods and services used for personal use or business entertainment costs.
Reclaiming VAT requires you to complete a quarterly VAT Return, totalling the difference between the amount of VAT your business paid and how much VAT the company charged during an accounting period. Reclaiming VAT is not straightforward, and many exceptions and exemptions must be considered.
For more information on VAT, please refer to the.GOV website for more information.