There are 3 rates of Stamp Duty Land Tax on the purchase price of a commercial property: 0% up to £150,000; 2% on the next £100,000; 5% over £250,000.
With commercial properties, the landlord normally applies to HMRC to ‘opt to tax’ – which means VAT would be charged on any rent which is then reclaimable by the tenant. When an ‘option to tax’ has been made, VAT must be charged on the sale of the property. If the new purchaser is going to use the property as business premises, it can recover the input VAT charged via a VAT Return without an option to tax the property. But if the purchaser wants to rent it out, they should also ‘opt to tax’ the property or they will be unable to recover the VAT on the property and on future property costs.
Capital Gains Tax on selling a commercial property
For a Company, any Capital Gain is taxed at the Corporation Tax rate of 19%. For an individual, any Capital Gain above the Annual Allowance (2019/20 £12,000) is taxed at 10% and/or 20% (depending on other taxable income) – which is less than the rate for residential properties.
As well as claiming ‘normal’ capital allowances on fixtures and fittings in the property (which reduce taxable income), a landlord can also claim capital allowances on ‘integral features’, such as electricity, water and heating systems (at a reduced writing down allowance rate of 6%).