buying commercial property - tax benefits/pitfalls

dannyb · Apr 4, 2010

Hi, I'm considering purchasing a commercial property for my business, I'm not great with tax, and wonder what the tax implications are both positive and negative. In my simplistic understanding, if for exaample my turnover is 50k, and the property is 100k, my profit over 2 years would be 0 and tax therefore 0. The money would be largely lend from personal savings and paid for upfront with some cash also from the business.

Couls anyone shed any light on how this would affect taxation?

Many Thanks,

db

David Griffiths · Apr 5, 2010

There is no tax relief for the purchase of property, so your hopes of a zero tax bill are hopelessly optimistic.

You may be able to agree that part of the purchase price is for fixtures and fittings, and that element would qualify for relief under the annual investment allowance or capital allowances, but nothing at all for the building itself.

KM-Tiger · Apr 5, 2010

dannyb said:
... if for exaample my turnover is 50k, and the property is 100k, my profit over 2 years would be 0 and tax therefore 0.

In a word, no. You are confusing profit and turnover in that statement, and also property is a capital investment, so the whole cost is not allowable against tax.

There are a number of ways in which commercial property can be owned. By a company, by an individual and then leased to the company, by your pension fund. Each have pros and cons and different tax implications. There may also be a VAT issue if the property you want to buy has 'elected to tax'. And, depending on the property age, there are other obscure tax allowances which may or may not apply.

Proper advice on this is probably beyond the scope of this forum. Your accountant would be your best port of call.

dannyb · Apr 5, 2010

thanks david, im pretty optimistic on the whole but `i wasnt expecting not to pay any tax, just using those figures as an example to attempt to understand how it might work from a tax perspective.

KM, thanks i've been in touch with my accountant but hes always hard to get hold of, hence my attempt to find some info here, sounds like i need to persevere with that,

thanks again

Strontium Dog · Apr 5, 2010

Assuming it is a cash purchase you could make the 100K contribution into a pension scheme, obtain a tax deduction, and then the pension scheme buys the property. If you need a mortgage for the purchase you will probably need to jump through a large number of hoops.

Williams lester · Apr 6, 2010

dannyb said:
KM, thanks i've been in touch with my accountant but hes always hard to get hold of, hence my attempt to find some info here, sounds like i need to persevere with that,

Sounds like you need a new accountant!

Ray Coman · Apr 6, 2010

Before you proceed, be careful about placing the property in a company, as this could result in a so called 'double tax charge.'

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buying commercial property - tax benefits/pitfalls

dannyb

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