If it is to run a business from the premises there are a number of tax considerations. But the decision to buy or rent premises for a business should take into account a number of factors of which tax is only one. A major consideration is the likely success of the business. Around a third of new businesses cease with three years. If you purchase a premises and the business does not work out you may be stuck with a long-term commitment because of the premises. So decisions to buy premises should not be driven by tax considerations alone.

Assuming the purpose of acquiring the premises is to start a business, if you rent premises the rental costs will be allowable as a deduction against the business profits as would any other costs incurred as a result of a lease agreement. If you purchase the building, and ownership of the building is in the same legal entity as the business, the financing costs of the premises would be an allowable charge against the profits. Alternatively, particularly if the business would not occupy the whole of the premises and part of it would let to other parties, it might be more advantageous to keep the business and the premises separate. There would also be a potential Capital Gains Tax liability when you came to dispose of the premises, although there is an annual exemption (£8,800 in 2006/7) and “taper relief” for assets owned for each complete year dependent upon whether the premises is a business asset or a non-business asset. The maximum period of taper relief is 10 years for non business assets (60% of gain chargeable) and 2 years for business assets (25% of gain chargeable). Anyone considering purchasing or leasing premises should take legal advice and consult a chartered accountant about the tax considerations.
The ICAEW cannot accept any responsibility for the answers to the smallbusiness.co.uk website. By their nature the questions do not give sufficiently precise and full information to give a personal response. The response is general guidance including where the enquirer might find further and fuller information of relevance to the current enquiry.

I teach exercise at home. I pay a big mortgage to do this. If I rented a hall I'd get tax relief on the rent I pay the hall owner. WHY can't I get tax relief when I pay a lot of money and give up space to run a business in my home? Thank you for any ways around this anyone.

Thank you very much for the above, anyone else with any more advice, I'd be very grateful.

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