Buying commercial premises

Hillier Hopkins LLP

Chartered Accountants & Tax Advisers

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Finding the right premises is often critical to the success of a business. For many, leasing those premises will be the answer, giving them the flexibility to move or grow as the business expands.

Yet, just as residential property values have increased, so too has the value of commercial premises. Business owners may well be tempted to acquire a property for their own business or as an investment. It should not, however, be a decision a business owner takes lightly as it can tie up a lot of capital.

Before committing sizeable sums of money to a commercial property, business owners may want to consider the following points.

Location, Location, Location

As the popular TV series reminds us, location is the key to residential and commercial property alike. A shop, for example, in the wrong location is unlikely to be a success. Where passing footfall is not so important – for example, an office or industrial unit – location still matters. Accessibility to staff, availability of parking and any deliveries will need to be factored in.


When committing sizeable amounts of cash into bricks and mortar you will want to make sure those premises will suit the business as it grows. Yet you will not want to over-commit and tie up valuable cash in premises that are too big. Taking advice from an experienced commercial property agent can help you reach the right decision.

Fit out costs

In addition to the cost of purchase, renovations and fit-out costs will need to be factored into your plans. Commercial buildings will need bathrooms, kitchens, meeting rooms and the space for retail, manufacturing plant and machinery or desks.

Use classes

Commercial property is assigned specific use classes that determine how premises can be used. Class E, for example, includes retail, restaurants, financial and services, and office use. Class B2 permits industrial and Class B8, distribution and warehousing. Whilst it is possible to change use it is not always straightforward.


There are many ways a business can fund the purchase of commercial property, including a mortgage, commercial loan, bridging finance or from reserves. All will have different tax positions and implications on cash flow. It is recommended a business take advice and fully understand the financial implications of the preferred funding route.


When considering the amount of funds you require, you will need to take into account that

Stamp Duty Land Tax is payable on the purchase of the commercial property. Commercial premises can take advantage of the lower rates (compared to residential property), however depending upon the purchase price, this can be up to 5%. Also, a new leasehold commercial property not only pays Stamp Duty Land Tax on the purchase price but can also be subject to Stamp Duty Land Tax on the value of the annual rent too (if the threshold is met).

Businesses are often forgetting that Capital allowances can be claimed on the plant & machinery within the commercial property they’ve purchased, and this includes assets that are intrinsic fabrication of the commercial building, such as heating and cooling systems, emergency lighting and security systems. Capital allowances reduce the taxable profit your business makes and therefore reduces the tax payable.

Ownership structure

Owning the property in the business can result in the property being exposed to the full risk inherent in the business activity.

Before purchasing the commercial property, we would always recommend that you seek advice surrounding how to structure your purchase as this can potentially have a big impact on taxes.

Get in touch if you would like some advice on this.

Do you need extra information?

James Johnson - Principal at Hillier Hopkins

James is a Chartered Accountant with more than twenty five years experience in accountancy and taxation. His particular expertise is working with entrepreneurial and family businesses.

Contact James at or on +44 (0)1908 713873

Milton Keynes