Financial aspects of an office fit out – FAQs
Click on the links below to jump to the relevant questions:
- How much will it cost to refurbish my office?
- How much does office furniture cost?
- Are there tax benefits to having an office fit out?
- Are there payment plans to help manage the cost of my office fit out?
How much will it cost to refurbish my office?
This will firstly depend on the type of fit out that’s needed. You may have heard the terms ‘shell and core’, ‘category A’ and ‘category B’:
- Shell and core is essentially the bare bones of a building’s interior that you’ll usually see when it’s a new construction – concrete floors and walls, with no lighting or facilities. But if it’s to be a shared office building, for example, communal ‘core’ facilities, such as lifts, toilet and the main building reception, are usually finished to a high standard and ready for tenants.
- Category A refers to the level of fit out provided to the landlord when they begin renting the space and typically includes raised floors, suspended ceilings and lighting. It also includes basic mechanical and electrical services, smoke alarms, heating, ventilation and air conditioning (HVAC) and basic internal finishes, such as walls painted white. Although the space would be technically habitable in this state, it is still considered a blank canvas ready for the next stage.
- A category B fit out comes after category A: a full design and installation including:
- Workstations and furniture
- Meeting rooms, breakout areas and 3rd space
- IT installation and infrastructure
- Design and brand detailing
We offer both types of fit out, but taking an office from category A to category B is the most common.
The cost of this depends on a number of variables, not least the size of the office, the number of employees occupying it, the location and the level of refurbishment that’s required.
For example, if the installation were to include the flooring, ceiling, lighting and two meeting rooms, a typical cost could be £20 per square foot. But if furniture, fittings and equipment (known in the trade as FF&E) are also required, then the cost would go up accordingly.
See our page on typical costs of an office fit out for further information.
How much does office furniture cost?
As a rule of thumb, office furniture of a reasonable standard typically costs £550 per head, not including meeting rooms or breakout areas.
Are there tax benefits to having an office fit out?
Yes. Fixtures, fittings and furnishings are all eligible for capital allowances, which is expenditure eligible for full tax relief in the year of purchase. Currently there is an annual investment allowance (AIA) of £200,000 and 18% tax relief is available for expenditure over and above the £200,000. So, for example, if your company were to invest in a £500,000 fit out, you could claim AIA on £200,000 for integral features and fixtures in the first year, then spread the remaining AIA claim over the next few financial years, putting it through your company’s profit and loss account.
These tax allowances apply even if payment is spread over a number of years.
So, some examples:
- A project cost of £200,000 will actually cost the business £160,000.
- A project costing £500,000 will give you tax savings overall of just over £88,000.
In most cases you can deduct the full cost of these items from your profits before tax using AIA. You can find out what does and doesn’t count as plant and machinery on the government’s website, but essentially you could be eligible to claim for all or part of the cost of an office fit out.
Are there payment plans to help manage the cost of my office fit out?
Yes – you don’t have to use cash or bank facilities to fund your project – an alternative could be to lease it. Leasing is a tax-efficient and cost-effective approach to achieving the ideal workspace while retaining capital in your business.
We work in partnership with Plus Finance to offer customised finance packages to businesses needing to buy furniture and refurbish or equip their working environments, whether brand new or as an upgrade.
The benefits of leasing your office fit out project include:
- Payments are 100% tax allowable, which means they can be set against company profit.
- Payments are fixed for the duration of the lease period, which allows you to budget effectively and with certainty. It also provides you with a hedge against inflation.
- By spreading the cost over 3, 4 or 5 years you can acquire the solution that fully meets your needs now, rather than being restricted by your current capital budget.
- In most cases Plus Finance can arrange a lease facility with no deposit, meaning the project has only a minor impact on your cash flow.
- Leasing means you preserve your existing bank credit lines, without compromising future working capital, leaving them available for future business development or investment purposes.
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