How to treat workshop built at home

alimvpc Registered Posts: 13 New contributor ?
Hi all!

Please can you help me with a scenario I'm not sure how to treat.

My client runs a painting and decorating business, is VAT registered and is on the flat rate scheme. They are having a workshop built in their garden, solely for work purposes, which will cost £6,500 inc VAT for everything involved - materials, construction etc.

Can they claim the VAT back on this purchase as a capital asset over £2,000? I'm assuming if the answer is yes then the workshop is classed capital expenditure and therefore the cost cannot be deducted as an expense in the usual way?

However, if the VAT can't be reclaimed, does this then mean that the whole amount can be deducted as an expense as the workshop is not treated as a capital asset?

Thank you for your help.



  • davealucas
    davealucas MAAT Posts: 141 Dedicated contributor ? ? ?
    Certainly the workshop should be treated as a capital asset and, under normal circumstances VAT would be recoverable, but I am not sure that you can under the flat rate scheme. You may be better off talking to HMRC directly on that matter.

    Even if VAT is not recoverable, it should still be treated as a capital asset rather than an expense in accordance with financial reporting standards.
  • douglasstroud
    douglasstroud Registered Posts: 295 Dedicated contributor ? ? ?
    Agree with above, no VAT reclaim if using the FRS as the construction is a supply of services not capital expenditure goods.
    You will not be able to expense the cost either as it will still be capital in nature not revenue.
    You should be able to claim CA on the fixtures and fittings.
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