Can I claim for building a home office extension through my limited company?

Hi Oliver,

This is an area where the "mixed things" you've read come from genuine trade-offs, so let's go through each point.

Is it a business expense? No — a £25–30k building extension is capital expenditure, not a revenue expense, so the company can't simply deduct it from its profits. And because it's a residential dwelling, there are no capital allowances on it either (the Structures and Buildings Allowance specifically excludes dwellings). So if the company funds the build, it gets no corporation tax relief on the cost.

Does exclusive business use change that? Not for the better — it actually creates a bigger problem. If part of your home is used exclusively for business, that part is not covered by the main residence CGT exemption when you sell. On a £25–30k extension used only as an office, the gain on that slice could be taxable. Mixed use (the room used partly for home-office work and partly for personal use) keeps the exemption intact — but then, again, no allowances.

Rent to the company: if the company pays you rent for the room, that rent is taxable income for you personally and must be at market rate. It doesn't solve the CGT issue above, and while the company gets relief on the rent it pays, you pay tax on what you receive — so there's no net gain beyond shifting profit around.

The cleaner approach: pay for the extension personally as a homeowner and don't route it through the company. Then claim your ordinary working-from-home costs — the HMRC flat rate for the hours you work at home, or a fair proportion of actual household costs — as a business expense. You get relief on those, with no CGT hit when you sell.

Given the sums involved, a quick chat with an accountant before you commit would be money well spent.

Amelia