Setting up to WFH in whatever capacity differs significantly for each employer and employee and is dictated by a range of factors, some personal and some practical. Considerations include what the frequency of use will be, what the job role requirements are, whether there are any physical restrictions, what the persons position or status is within the organisation and what budget is available.
As highlighted in previous articles, most forms of WFH require a holistic approach if it is to be maintained in the long term and thus deliver the significant benefits available for the employer and employee. For some, the solution requires little more than a simple but well thought out work area within the home that provides:
- A positive ergonomically set up workspace
- The most efficient IT & Communication set up
- Good quality natural and artificial lighting
- Wellbeing enhancers
- A delineation between work and home life
For others, the solution may be more complex, requiring significantly more consideration. Whatever the situation though, it is unlikely that many would say ‘No’ to an office space separated from the home - like a Garden Office (subject to space availability of course). A dedicated zone, isolated from the day to day of home life, has the potential to provide a work focused, productive, yet stylish and personalised environment which can also contribute to that all important ‘Going to the office’ vibe.
The demand for quality Garden Offices had been growing pre pandemic but since the shift towards a WFH environment, the demand has never been greater, but are these units really a viable option or an unjustifiable luxury?
Can a Garden Office Really be Justified?
Last year it was feared that up to 4 million people would be unemployed come the end of 2021. Fortunately, due to the billions spent on schemes to protect jobs and the rapid roll-out of vaccines, the government's spending watchdog the OBR, is now forecasting this to peak at 2.2 million or 6.5%. This number is then expected to fall next year as the economy recovers from the crisis.
Obviously a hugely encouraging and welcome piece of positive forecasting by the OBR but this doesn’t detract from the fact that there is still more unemployment pain to be felt, as the most recent unemployment rate for Oct-Dec 2020, showed unemployment rates sitting at 1.74 million or 5.1%.
So, with Garden Offices ranging in price from a few thousand pounds up to tens of thousands, for some, the purchase of one will be perceived as an unjustifiable luxury. It is true that addressing this incredibly delicate subject will be difficult for some organisations but for others, it could represent a positive take on what the future working environment may look like perhaps for its owners, directors, managers and even valued employees.
The remainder of this article assumes that the option of purchasing a Garden Office or Offices is something worth considering now or in the future or to simply satisfy the curiosity of those that had perhaps previously dismissed the concept.
For some, a Garden Office is seen as nothing more than a glorified shed but with an average price point across the UK of £16,500 for a small unit, they definitely are nothing of the sort. Obviously, purchasers can ‘cut their cloth to suit’ the needs of the user but as this price point suggests, there is much more to a quality Garden Office than some timbers, thin waney edge cladding and a felted roof.
A well designed and built unit will provide all year round use, being cool in the summer and warm in the winter. They offer a secure, fully connected and functional work conducive environment to operate from that also offers the user the opportunity to create a personalised, comfortable environment that will help enhance wellbeing and productivity levels.
The growth in Garden Office sales over the past year has been considerable and as such supply and demand pressures and increases in material costs, have unfortunately meant some suppliers have increased prices considerably. In addition to this, as elements like kitchenettes, washrooms or toilets are added, the average cost of this small unit will clearly increase.
Therefore, can a Garden Office really be an affordable solution without reducing the specification to such an extent that it just becomes……a glorified expensive garden shed?
Garden Office Fact:
A garden office can be built under ‘Permitted Development’ rules in many cases. These rules state the sizes and positioning of different shape buildings which can be built without the need for full Planning Permission. UK Planning Portal
Affordable Garden Office Solutions
As already highlighted, a Garden Office of a reasonable size and of good quality, undoubtably represents a significant cost for any organisation from multi-employers down to sole traders, or indeed as an employee. However, with some creative thinking, this purchase can potentially be made more affordable than it may initially seem.
Divert WFH Related Savings - There have been many studies relating to the potential positive financial impact that employees WFH on a permanent or hybrid basis could have on organisations. These typically highlight the big-ticket saving areas of property cost reductions. For example, enabling 50% of employees to WFH 2.5 days a week, would mean the required property size could be reduced by 25%. With average property costs per employee per annum of between £17,700 in Newcastle and £67,455 in London, a very simplistic calculation would realise savings of between £4,425 and £16,864 per employee, per year. For a small business in an individual serviced office unit, it could be entirely possible to forego 100% of the rent and service charges, realising savings in excess of £5,000 per annum.
Our article The Financing of WFH, also highlighted other areas for saving consideration.
With property lease expiration or break clause dates pending, the opportunity to explore the financial benefits of making significant adjustments in property needs has never been greater. Diverting some of the potential savings available into creating the best possible WFH set up for employees could reap large rewards.
Tax Efficiency - Most suppliers of Garden Offices advertise their units inclusive of VAT. VAT rules regarding structures differ from those for income tax and corporation tax, meaning that if your organisation is VAT registered, this element will be reclaimable. Using the £16,500 average small unit cost example, this drops the rate to £13,750 net.
As a Garden Office is classed as a ‘structure’ rather than an item of equipment, its purchase* is unfortunately not tax deductible from profits. This also applies to other aspects such as its design and delivery charges. However certain elements such as any thermal insulation built into the unit or wiring and plumbing, do qualify as a capital allowance.
Whilst not related specifically to the purchase of the actual Garden Office unit, it is worth noting that certain fit out items like curtains, furniture, fixtures and fitting also qualify as capital allowances, as do running costs like heating and lighting, separately metered water supply, repairs and redecoration.
*see Rental option below
Method of Acquisition
The method of Garden Office acquisition will be determined by a range of factors which will differ for each organisation or individual based on their individual circumstances, however as shown below, there are several options available.
Outright Purchase - This type of expenditure would not typically appear within the budget planning of most organisations but with the potential of using some of the WFH associated financial savings highlighted above, this could become an increasingly common budget line. Subject to employee location and the required Garden Office size and specification, a unit could be paid for from WFH derived savings within a relatively short time frame.
Under Finance - Many Garden Office suppliers have partnerships with finance companies that offer Finance Packages specific to these units. Whilst in the long term this method will cost more due to the interest charged, spreading the cost does make them more affordable in the short to medium term. Some packages require no initial deposit just an agreed number of monthly payments, with some offering up to 10 year terms. Using the average gross unit cost of £16,500, if financed over 5 years @ 7.9% Apr, this equates to £314pm. For those able to reclaim the VAT, this drops to £262pm
Rental - There a few suppliers that offer a rental option, enabling the unit to be acquired at a very affordable rate. Usually, they charge an upfront fee to cover delivery and installation and then a regular monthly rental fee, making this option very cashflow efficient. There is the option to purchase the unit outright in the future or the rental agreement can be ended after 18 months with nothing more to pay. Using the UK Standards suggested minimum office space requirement per person of 5m2 (equivalent of approximately 8 x 8 ft), a suitably sized unit could be rented from as little as £130pm gross or £108pm net. This option may also be viewed as an allowable business expense.
Payroll Loan to Employee - The employer acquires the Garden Office and provides an interest free payroll loan to the employee, like a train season ticket loan, with a deduction from payroll which ultimately sees the employee repay the total unit cost. HMRC indicate that as with the train season ticket loan, there is no tax, NIC or reporting requirements on a ‘beneficial loan’ of this kind up to the value of £5,000 per tax year.
Whilst this option doesn’t make the initial funding of the Garden Office any more cost effective in the short term, it is certainly something worth considering as it means that ultimately the unit is purchased and owned by the employee.
Demand for Garden Offices is currently high as the pandemic has driven the WFH movement. Across the UK, there are hundreds of suppliers of Garden Offices, many of whom have been established for years, whilst others have sprung up over the past 12 months to take advantage of the demand. Identifying the right supplier and some good financial planning are key to the success of a Garden Office acquisition. For additional general advice and guidance on these issues, please contact us.
The WFH Zone strongly recommends that independent professional tax and financial advice is sought before any purchase.
In summary, the acquisition of a Garden Office need not be considered an extravagance. There are financial solutions available that make them a viable option for creating the ideal WFH environment which will ultimately benefit the employee and employer, with improved productivity and wellbeing. It could be time to consider building the acquisition of Garden Offices into budgets.
The WFH Zone is the UK’s first online portal designed to assist organisations in the process of setting employees up to work from home in the most cost effective and ethical way. Our service provides a filter and search facility that helps employers and employees find quality suppliers of a range of Services and Products specifically associated with a work from home zone.