Good News for Commercial Property Investors

If you sell your commercial property investment at a profit, do you know what rate of capital gains tax you will pay? Most people assume it will be 40% but think again. As of April 2004 owners of commercial properties let to most small and medium sized businesses are entitled to “business assets” taper relief. This is a huge advantage as it can bring the tax rate down to as little as 10% after just two years. So if you already own premises let to a small business or independent retailer, your potential tax bill could be far lower than you expected. However, in some cases you may need to do some preliminary restructuring to maximise the tax advantages.

If you are not yet an existing investor but are looking to buy a property, choose your investment carefully. Do you really want to be stuck with the wrong sort of tenant, for example, a quoted company or a public sector tenant? The covenant may be stronger but you’ll lose the chance to pay CGT at just 10%. Similarly if you are an existing investor and your building’s empty (or will be soon), think carefully about the type of tenant you sign up. You might also want to include restrictions in the new lease on the tenant assigning or sub-letting to non-qualifying tenants. For further details please contact:

Andrew Goldstone
Tel +44 (0)20 7440 7205
andrew.goldstone@mishcon.co.uk