Commercial property investment is on the up. According to the Daily Telegraph, there has been a 10% increase in commercial property values since last year. What should you consider if you’re interested in investing in commercial property?
- Detailed knowledge about where to invest and the type of property to invest in is vital.
- An increase in working from home and ‘hot-desking’ has reduced the demand for office space but there is still a need for buildings which have up-to-the-minute technology in place.
- Retail businesses rely on foot-fall and benefit from other similar businesses nearby; empty properties could have a negative impact.
- Transport links, parking and good access are important for any commercial business.
The factors above will determine the level of rent you can charge. A beneficial lease will allow for regular upwards-only rent reviews, helping to maintain a regular income. Leases of up to 10 years are common but the stability of tenants will depend on the state of the business sector involved.
There are also different costs related to buying commercial property. As well as legal and agency fees, a deposit of 30% or more may be required at the time of purchase. Once the property has been purchased, there will be costs related to maintaining and administering the property.
Tax on commercial property
If you are investing in commercial property, stamp duty land tax and business rates are normally payable. Either the landlord or renter may be liable for business rates, depending on the terms of the lease, but there are a few exemptions.
Stamp Duty Land Tax (SDLT) is payable when properties are sold, along with capital gains tax. (This applies to both residential and commercial property.)
VAT is not normally payable on commercial property but there are some circumstances when it is due.
If your company has invested in residential property worth more than £2m in the UK, Annual Tax on Enveloped Dwellings (ATED) will also be payable via a tax return every year.
We can help
At Arram Berlyn Gardner our specialist property accountants and property tax advisers provide specialist bespoke advice for a range of different property investors and syndicates. We can help you understand the necessary accounting and compliance requirements and, if required, maintain detailed property accounts. Our property accountants can also advise on any expenses which can be offset against tax and how you could reduce your tax bill as well as when you will need to pay any tax due.
If you would like to discuss any element of this blog post with us please contact our London office on 020 7330 0000.