Taxation: What Are My Responsibilities?

If you are a property owner, you need to be aware of certain tax implications and responsibilities.

Some properties are eligible for discounts from their local councils, depending on a number of factors. 

Landlords and owners

Income Tax

If you are a landlord living in the UK, you will need to pay Income Tax on any profits you make from the rental of properties. Even if you are a non-resident of the UK, if your property is in the UK, Income Tax will still have to be paid on any profits.

Business Rates

Most commercial properties will require the owner to pay business rates, which is calculated on the rate value of the premises, multiplied by a 'government multiplier' (known as the 'poundage rate' in Scotland). This rate is altered every year in line with inflation.

Relief is available under the following circumstances:

Small business rate relief

Given to those who have only one property with a rateable value of less than £15,000.

If your business only uses more than one property, you may still be eligible - It's best to check with your local council.*

Rural rate relief

Between 50 and 100 per cent relief is given if your site is in a rural area with a population of fewer than 3,000 people.*

You won't pay business rates if your business is in the specified area, or if it's the only business of its kind in the area (post office, village shop) with a relatable value of up to £8,500 or a pub or petrol station with a relatable value of up to £12,500. 

Transitional rate

Relief is given if your property's rateable value changes during a revaluation (applies to England only)

*If the 2017 revaluation means that you are longer eligible for small business rate relief / rural rate relief, your bill won't increase by more than £50 a month (from April 2017 to 31st March 2018).

Charitable rate relief 

Charities and amateur community sports clubs can apply for relief of up to 80 per cent if a property is used for charitable purposes.

If you're not eligible and are a nonprofit or voluntary organisation, you may still be able to get discretionary relief - you can find out by contacting your local council.

Enterprise zone relief

If you’re starting up or relocating to an enterprise zone, you could qualify for business rates relief. 

The council will work out and apply the relief and you could end up receiving £55,000 a year over a 5 year period. 


Capital Gains Tax

When you sell commercial property, Capital Gains Tax may have to be paid if the asset has increased in value.

The amount which has been gained is taxed, not the money you receive from the sale. For example, if your office space has increased in value by £10,000 since purchase, you pay tax on the £10,000.

You may be able to reduce your tax or delay paying if you are eligible for tax relief. 

Current rates are 18 per cent and 28 per cent for individuals, dependent on your total income, 28 per cent for trustees of someone who has died, and ten per cent for those who qualify for Entrepreneurs’ Relief.

You do not need to pay this tax on assets worth £6,000 or less.


Stamp Duty Land Tax

When buying commercial property, you will have to pay Stamp Duty Land Tax (SDLT); the amount depending on the value of the purchase. If the transaction is less than £150,000, there is no SDLT, but then the tax will range:

Below £150,000 and annual rent is below £1,000 - zero per cent

Below £150,000 and annual rent is above £1,000 - one per cent

£150,000 - £250,000 - one per cent

£250,000 - £500,000 - three per cent

Above £500,000 - four per cent

These figures may still alter based on the rent. First-time buyers are not exempt, whilst an extra one per cent tax may apply if the rent is payable over a lease's life.

Stamp duty relief can be given if you are transferring land between companies in the same group, when all or part of a company's trade is transferred to an intermediary, if stock is lent, or if you transfer to a charity. All cases will still need to get a transfer document stamped.

Commercial property is usually exempt from VAT. An owner does have the option, however, to 'opt to tax', by asking HM Revenue & Customs to remove the exemption. This usually benefits landlords, who can recover VAT on expenses, if their tenants are VAT-registered and can recover any charged VAT. Generally, it is always important to seek professional advice in regards to VAT, as you may otherwise end up with a hefty tax bill.

When in doubt, always contact your local authority or HMRC when dealing with tax disputes or if you are wanting to apply for relief.

Melanie Luff

About the author

Mel wrote for all titles in the Dynamis stable including, and as well as other global industry publications.


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