Helping commercial property landlords in London with accounting and tax matters.
The UK’s property sector makes up a critical part of the country’s economy and investing in commercial property can be a financially rewarding endeavour, especially if you have a trusted accountant who can work with you to tackle the tax intricacies and implications.
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As businesses or individuals who buy and rent out commercial property are liable for various taxes, it is vitally important to understand what exactly is necessary when accounting for commercial property. Our specialised accountants for commercial property owners will ensure that you are fully aware of what is expected of you in terms of your taxes. Our passion for this sector of accountancy is evident in our dedicated support and willingness to guide and assist you with tax and accounting matters.
What is the best structure to manage your commercial property?
As a commercial property landlord, your income gained from letting is subject to tax and your tax liability depends if the ‘owner’ is you the individual, a trust, or a company that you have set-up. If you plan to set-up a trust or a company to manage your property, speak to us today – we can walk you through the benefits of doing so and how we can help.
In the UK, businesses pay taxes known as business rates on business (non-residential) properties. These rates are calculated on a property’s ‘rateable value’ on the open market. Usually, the local councils will send out business rates bills in either February or March to the business owners.
Business rates are charged on:
- Holiday rental homes or guest houses
If you own a commercial property, you are liable for business rates, and if you rent a business property, it is important to be clear in terms of the lease regarding who is liable (the landlord or the tenant).
In most cases, business rates are inevitable, but there are few exceptions such as agricultural buildings, small buildings, and businesses whose rateable value has seen a large increase. Empty business property is also given, on average, a three-month tax relief.
Stamp Duty Land Tax
If you have bought (freehold or leasehold) a commercial property or land over £150,000 in the UK, you will need to pay Stamp Duty Land Tax (SDLT).
Non-residential property includes:
- Commercial property, for example, shops or offices
- Agricultural land
- Any other land or property which is not used as a residence
To determine how much tax you are liable for, you can use HMRC’s SDLT calculator.
Commercial property with regards to VAT
By default, the sale or lease of a commercial property is exempt from VAT. This means that a commercial property purchaser or tenant does not need to pay VAT. Although it may sound good, it also means that commercial property owner or landlord will not be able to recover any VAT paid out on expenses. To overcome this, many commercial property owners or landlords choose ‘option to tax’ by notifying HMRC in writing – this option allows them to charge VAT when selling or leasing their property, and consequently, they can recover VAT on related costs.
It is essential that you understand the VAT status of any property you own – otherwise, the consequences can be detrimental. Speak to one of our specialist accountants and VAT experts today to explore your options in full.
Commercial property and Inheritance Tax Relief
Business Property Relief (BPR) provides your next of kin relief from Inheritance tax (IHT) on the transfer of relevant commercial assets at either 50% or 100%. This means IHT is not applicable if the business property, held at least two years, is gifted to your beneficiaries while you the owner is still alive or as part of your will.
Commercial property and pensions
A Self-Invested Personal Pension (SIPP) allows you to buy and invest in UK commercial property. If you choose to use the property to run a business, you will pay rent at commercial rates to SIPP which is generally free of income tax and capital gains tax.
Commercial landlords can prepare for Making Tax Digital (MTD)
Making Tax Digital (MTD) is a government initiative to transform and digitise the tax system. For commercial property owners who receive an income of over £85,000 a year from letting your property and you are VAT registered (through ‘option to tax’ mentioned above), then your accountants would be working with you to make sure that your VAT returns are submitted to HMRC through an MTD compatible software.
If your rental income is less than £85,000 at present and you are not VAT registered, then you do not have to worry about Making Tax Digital but it is still helpful if you start keeping tax records in digital format and using a Making Tax Digital compatible software. At Tax Agility, we are gold partners of Xero, an online accounting software popular with small business owners including property owners. Talk to us today and see how you can start taking full advantage of Xero to help you manage your financial information.
How our accountants for commercial property owners can help
Unlike the other accounting firms within the UK, we pride ourselves on forming solid relationships with our clients and understanding their business needs. Our passionate accountants for commercial property have a wealth of knowledge in areas such as property investment and property management. We are here to help property owners with business plans, management accounts, rental accounts, bookkeeping, to name but a few.
If you’re a commercial property owner or are planning to invest in commercial property, talk to dedicated commercial property accountants at Tax Agility by calling on 020 8108 0090 send us a message via our Contact Form.