1. Claim for your home office
If you work from home, don’t forget to claim tax relief for a suitable proportion of your household expenses. The Inland Revenue now accepts claims for mortgage interest, council tax, insurance, heat and light, repairs and cleaning costs. “Even if you have business premises and only work from home part time, you could be eligible,” advises Carl Bayley, author of How to Avoid Property Tax. “Directors and other employees may need a contractual obligation to work from home to claim this deduction.”
2. … But don’t claim exclusive use
Getting an income tax deduction for working from home is useful but make sure that you don’t claim exclusive business use of part of your home: this could lead to a loss of part of your capital gains tax exemption when you sell. Use your office or study at home for business 99 per cent of the time and you’ll have a nice tax deduction with no capital gains tax problems.
3. Cut the VAT out of your rent
If you’re paying VAT on your office rent, it means that your landlord has “opted to tax”. If you’re not VAT registered or you’re partially exempt, you could reduce your bills by asking your landlord to “opt out”. “They may want to charge a little more rent, as some of their costs will increase, but you can cut out that extra 17.5 per cent VAT charge – or 20 per cent from January 2011,” says Bayley.
4. Buy by December
If you’re thinking of buying new business premises, you should think about completing the purchase by the end of the year. VAT is often payable on the purchase of business property and it’s going up to 20 per cent from January 4, 2011. You also pay stamp duty land tax on the VAT-inclusive price. In some cases, the extra VAT will push the stamp duty land tax up to three per cent or four per cent. Even if you can recover the VAT, you’ll still be stuck with the extra stamp duty land tax.
5. Lease by December
Stamp duty land tax is also payable on new leases and, where the landlord has already “opted to tax”, it’s based on the VAT-inclusive rent. Take out the lease before January 4, 2011 and the stamp duty land tax will be less. Better still, take out the lease before the landlord “opts to tax” and you can cut VAT out of the stamp duty land tax equation altogether.
6. Claim your capital allowances
If you’ve built, purchased, modified, extended, or fitted out business property since April 2008, you may be entitled to a lot more capital allowances than you realise. Since then, all of the wiring, lighting, plumbing, heating and air conditioning in commercial property has been eligible for capital allowances, with immediate 100 per cent relief for up to £100,000 of qualifying expenditure a year in some cases.
7. Get even more allowances
Expenditure incurred up to April 11, 2012 in renovating or converting disused commercial property in designated “assisted areas” (set out in the Assisted Areas Order SI 2007/107), to bring it back into business use, is eligible for immediate 100 per cent tax relief. “Relocating your business to a vacant property in one of these areas could be a great way to make massive tax savings,” says property tax expert Bayley. “If you’re already in one of these areas, you can get the same relief for renovating a part of your premises which has been vacant for a year or more.”
8. Cut rent and save tax
If you own your company’s premises personally, beware: charging the business rent for the property will restrict or eliminate any entrepreneurs’ relief due on a sale of the property, increasing your capital gains tax bill from ten per cent to 28 per cent in many cases. Keeping the rent as low as possible could save you a great deal of capital gains tax on the eventual sale of the property.
9. Watch out for inheritance tax
The other major problem with owning business premises personally is that the property will only get 50 per cent relief for inheritance tax purposes. If you’re getting on in years, you may want to consider transferring the property to the business so that it will get full relief.
10. Appeal against your rates
You can appeal against your rates bill if a) you believe the rateable value of your property is incorrect, or b) your building is being affected by nearby construction work or road closures. Ratepayers generally have the right to appeal once every five years, so make sure your decision is well researched and, if possible, supported by relevant evidence. “I’ve appealed twice,” says Mark Needham, chairman of consumer electronics firm Widget UK. “The first time our so-called rates experts clearly decided we were not going to win and failed to turn up for the hearing. The second time, we got a significant reduction, albeit one we have to share for the next few years with the experts.”
We’ll be publishing 17 more property-bill tips in the September issue of Real Business magazine. Subscribe here.