Income Tax exemptions on commercial property investment

When investing in commercial property, make sure to pay attention to legal components including income tax exemption on commercial property.

In the run up to the next big things for your business, if buying commercial property is a top priority for investment or trading use, then we bring you 5 pointers to consider from the legal perspective when buying commercial property.

  1. Opportunities to look for

Unlike the residential properties, commercial properties are not sold on the high street. They are in fact, sold on through private treaties or auctions that are also considered a source of good value for the beginners in the segment.

When buying commercial properties in auctions, it is necessary that care is given to the fact that there is no bargain because when successful, 10 per cent has to be given on the day and the payment has to be completed within a month.

Getting necessary advice from a commercial lawyer or chartered surveyor about possible income tax exemption on commercial property and instructing a good commercial agent to help beat the market are key aspects to consider when it comes to investment expertise.

  1. Leasehold or Freehold

The owner contractually holds the interest for a set period limited to the length of the lease which is decided by the relationship between tenant and landlord. Freehold owners generally control or own all of the property, any structures or the land itself etc. The part of ownership may be restricted by a third party, for example, a right of access over the property.

Over the years, business lease terms have reduced. Though some commercial property tenants have a legal right to extend the contractual term of their lease, there is also the potential to hold a long leasehold interest. Though you might spend more time in buying a freehold property, the return will be much greater as rent from commercial property income tax is there.  It is necessary to check if there are any restrictions on use, if you need consent for alterations, whether the building is listed or in a conservation area.

  1. Loan or cash buyer

Commercial property is also all about cash and quick deals. The loan provider should know each step on the way. Commercial property lenders are more interested in lending against the income generated by well-let properties than the vacant ones.

  1. Costs

There are numerous costs like VAT, stamp duty and land registry fees, Surveyor, estate agent and solicitor charges and environmental report charges etc. It is necessary to obtain due diligence advice as there is no standard format for commercial properties. But there are tax deductions for commercial property.

  1. Tenancy

Always think about a tenant when buying commercial properties because well-let properties are more income-generating which means rent from commercial property income tax is beneficial. It allows you to budget your costs with a fixed rent, payment in advance and rent reviews also increase.