When it comes to inheriting commercial property, there are a number of legal questions which will arise surrounding the property. Particularly when it comes to important factors such as inheritance tax. Though inheriting commercial property presents a great many opportunities, it can also create a number of unique issues – which may require the advice of a solicitor.
Advice from a specialist can help you gain a clear understanding of your legal position and what considerations you need to make moving forward.
1. Property Market
The fluctuation of the property market, both up and down, is an important consideration to make when it comes to whether or not you should keep or sell the property. An unexpected market change could make your inheritance a sudden and unexpected financial burden. In which case, you may wish to sell it before it ever has a chance to be become as such.
The UK commercial property market will inevitably see changes once Brexit comes into full effect. As such, you be may be best advised to employ an independent specialist to assess the market and advise your next steps moving forward.
2. Inheritance Tax
If a commercial property is part of a person’s estate when they pass, then the property’s equity will form part of the overall estate value. Which means that if the total estate is worth over £325,000, then beneficiaries will expect to pay 40% of any amount over this number. In some circumstances, you may be eligible for Business Property Relief.
This can offer a tax relief on an relevant business assets at a rate of either 50% or 100% – however, relief is only available if buildings or land is to be used for the sole purpose of continuing the business. So, you could not receive this relief if you planned to sell the property, for example. Renting the commercial property to other businesses as a rental income will also exclude you from Business Property Relief.
3. Income Tax
Choosing to keep a property and rent it out to commercial tenants can be very financially rewarding in the long run. But, it also means that you will have to pay tax on any profit amounted. The exact amount will depend on the profit you are accumulating. In some cases, you can claim allowances or expenses – such as the employment of a property management company – as well your own personal allowance.
The benefits of renting out a commercial property can be extensive, especially in busy urban areas. Upkeep costs, maintenance, the structural integrity of the building, and dealing with the requirements of tenants will continually be something you need to manage. This increased responsibility may not be suitable for your lifestyle. Of course, you can simply hire a property manager in order to help manage these issues for you.
Here at Roger Hannah & Co, we can help to place a value on your commercial or residential property that can be used for inheritance tax calculation purposes. Our specialist team are prepared to help with all of your property needs, call on 0161 817 3399 or fill out the contact form for a confidential talk regarding your circumstances.