Buying or selling a commercial property

What you need to know when purchasing or selling a commercial property

Buying or selling a commercial property is a signficant decision. You will already have negotiations, financing, legal considerations and market conditions on your mind, so it can be easy to overlook what the capital allowance implications may be.

However, not getting expert advice might turn what you think is a great deal into missed tax savings!

Whether you’re looking at new premises, or thinking about listing a property, it’s worth speaking to our specialist team to ensure you don’t miss out.

Benefits when buying a property

Purchasing a property can be an exciting time for your business. You could be eyeing growth and expansion, seeing it as an investment opportunity or wanting to increase your brand presence. It’s important you speak to an expert to make sure you don’t miss out on the following benefits:

Tax Relief
Missed previous claims
Enhanced negotiation position
Increased property value

Tax Relief

Items within the property when purchasing, such as machinery, equipment and integral features, can be deducted from the taxable profits of the business.
Missed previous claims

If the seller hasn’t fully claimed all of their available capital allowances, the new owner can use them instead, furthering their tax relief. Although, you need to make sure that they are not seeking to retain capital allowances via a Section 198 Election (see below).
Enhanced negotiation position

Input from an expert can help identify any capital allowances which are likely to be unclaimed. This can help when negotiating a purchase price for the property.
Increased property value

Taking all of the above into account, with unrealised claims, your investment can become even more attractive.

Benefits when selling a property

You may feel that the capital allowance benefit may only extend to the buyer, there are considerations when selling your property too.

Tax savings
Increased property value
Leverage position

Tax savings

If the seller hasn’t utilised the capital allowances within the property, they can retain them by completing a Section 198 Election. This allows them to continue claiming the allowances.
Increased property value

Yes, we did include this for the buyer too! While this can be a benefit for the buyer once purchased, if a seller understands the full value of the capital allowances pre-sale, they can negotiate for a higher price due to the potential of the unclaimed allowances.
Leverage position

The buyer isn’t the only one with an advantage when it comes to the negotiation. If the seller is aware of any unclaimed allowances and doesn’t intend to claim them, they can use this leverage to justify an increase in the price of the property.

Section 198 Elections – An important tool in property sales

Buyer and seller are happy with the price of the property but then comes the question – who can claim the capital allowance within the building?

A Section 198 Election is key to a sale as it can mean the buyer has the ability to maximise the capital allowances available to them.

Once made, the Section 198 Election is permanent, so it’s worth speaking to an expert to ensure accuracy, compliance, mitigate risk, and that you have maximised your allowance.

Building or rebuilding a property?

You can still make a capital allowance claim, even if you’ve built, or re-built the property you occupy or rent out.

The structure then needs to be used for a qualifying activity which is taxable in the UK. This includes any trade, profession and vocation, plus property businesses, managing investments and much more.