Ten tax tips to benefit your business – whatever the Budget says

Big changes to commercial property SDLT could seriously increase the cost of large-scale inward investment, impacting on the attractiveness of UK commercial property.

But whether the chancellor tackles SDLT or not, property should take a closer look at its tax affairs. Here are 10 often-overlooked areas where you could make changes to benefit your business:

• Demergers: trading businesses attract more favourable tax treatment, such as Entrepreneurs’ Relief, so it can be worth segregating trading activities from investment activities.
• Capital Gains Tax: don’t forget the difference between capital gains tax, levied at 28%, and income tax, levied at up to 45%. If you have made a capital gain, make sure you are taxed at the right rate.
• Contaminated land: residential developers often aren’t aware of relief in the form of capital allowances, which may be relevant, for example, if they are stripping asbestos out of buildings.
• Surrenders: a premium paid by a tenant on the surrender of a lease may be tax-free for the landlord in specific circumstances.
• Rights issues: new shares acquired through a rights issue are treated as having been owned from the date that the original shares were issued. This is worth remembering if you are required to hold shares for a certain period of time to qualify for tax reliefs.
• Date of exchange: remember that as long as exchange of contracts is unconditional, it is the date of exchange that is relevant for capital gains tax purposes. This applies for capital allowances too.
• REITs: when REITs were created eight years ago, the rules were much tighter, with the main changes since being the scrapping of the conversion charge and relaxing of the shareholder base and listing restrictions. The earliest were Britain’s biggest property companies, but a series of other landlords have since converted to the regime.
• Deposits: if a seller receives a deposit before an ‘option to tax’ has been made by the buyer, it can prevent the purchase qualifying as a VAT-free `transfer of a going concern’. This can be avoided if the deposit is held by a solicitor acting as stakeholder rather than agent.
• VAT and SDLT interaction: SDLT is paid on the VAT-inclusive price of the property, so purchasing the property without VAT can save tax as well as helping with cashflow.
• Compulsory Purchase Orders: If you are a property investor and are subject to a CPO, some or all of any taxable gain can be relieved by rolling over into the acquisition of a replacement property. This relief is not normally available to property investors.

Clare Hartnell is senior managing director of real estate, European tax advisory, at FTI Consulting