The Income Tax, Capital Gains Tax and Corporation Tax of commercial property will be largely similar to that of residential property (see Property Taxes – owning residential property personally and Property Tax – owning residential property in a limited entity.
The main differences to consider in relation to commercial property are Stamp Duty Land Tax (“SDLT”) and VAT.
Stamp Duty Land Tax (“SDLT”)
The SDLT rates applicable to commercial rates are shown in figure 3.
Figure 1
VAT
" This is another complex area of taxation. I know what you’re thinking…what area of tax isn’t? But that’s what we’re here for. "
So… here’s the main points to note.
The Freehold sale of newbuild commercial property is standard rated (20%) for VAT.
Once it is three years old, the sale of the property is exempt from VAT.
UNLESS it has been opted to tax…
This is an important point to check as it can make the purchase price of a commercial property 20% more than you expect it to be.
VAT on costs of refurbishment of an existing building used by a VAT registered business are recoverable by the business even if the property hasn’t been opted to tax.
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If you need guidance surrounding the taxation of your commercial property income, please get in touch to start your journey with us.