Buying and selling a property can be a stressful undertaking and our team of experts can guide you through the process, the tax implications, and work with your legal advisers to free you to concentrate on your business.
Purchasing a property, for your business to trade from, may not be as straightforward as you think.
You should consider who will be purchasing the property. If it is purchased in the trading company your capital investment may be at risk should the business face difficulties in the future. If you have not already done so you should consider protecting your assets in a holding company which can also provide you with more tax planning opportunities.
If the trading premises are held in the corporate structure then it may also qualify for 100% Inheritance Tax Relief under the Business Property Relief rules.
You could consider purchasing the property personally and charging the company rent. This may not be suitable however as property owned personally will only qualify for a maximum of 50% relief from Inheritance Tax. This may not be relevant for higher rate taxpayers who will need to draw significantly more funds from the business in order to fund the loan repayments from the post-tax profits.
It may also be possible to buy the property in a pension fund which will allow the investment to grow in a tax-free environment with any rental income paid by the trading company increasing your pension fund. You will, of course, need to consult with your financial advisor to ensure this is the right choice for you.
Specialist advice should always be sought when purchasing or selling commercial property regarding capital allowances for any plant and machinery integral to the building. Without the correct advice, significant tax savings can be lost on purchase and there can also be a clawback of any capital allowances previously claimed if you are selling the property.
The sale of your trading premises may also crystallise a capital gains tax liability which we can calculate for you. If the property is owned personally you may be eligible for Entrepreneurs relief which would reduce the tax rate to 10% of the gain.
Our team of experts will be able to guide you through the complex decision-making process and advise you on the most tax-efficient option. We can liaise with your legal advisers to ensure that the contracts are suitable and correctly address the issues of VAT, Stamp Duty Land Tax and Capital Allowances.
When purchasing an investment property held for capital growth and a rental income you will need to consider how the purchase is to be funded, whether you intend to start a portfolio of properties and your longer-term plans.
You will need to determine whether the property should be bought personally or in another vehicle such as a:
If you are purchasing a residential buy-to-let property then there may be an additional 3% Stamp Duty Land Tax cost to consider if it is not your main home.
If you are purchasing a commercial property you may need to consider the VAT issues and decide whether an Option to Tax is suitable.
Whilst capital allowances usually only apply to commercial buildings they can be available on "multiple occupancy dwellings", such as an apartment block, in the are common areas. We can, of course, advise you on what relief may be available and help you with any elections required.
The future sale of the property will be subject to Capital Gains Tax either at the prevailing corporation tax rates if the property is held in a company, or the capital gains tax rates of 10% & 20% (18% and 28% for residential property) if owned personally or in a partnership.