Buying Premises

4. Costs

In addition to the purchase cost, you will need to budget for the other costs of ownership. Ask to see the previous owner's bills. Can you reduce any costs or will they increase?

4.1 A mortgage will require you to have buildings insurance, which makes commercial sense anyway.

See Insurance to protect your business.

4.2 The local valuation office will tell you what rates are payable on the premises.

• Check you are not being overcharged. (See Rent reviews and rating assessments.)
• You can look up the rateable value of the property instantly at www.voa.gov.uk.

4.3 If the property is on an estate, you may have to pay an annual service charge.

• This will usually cover park maintenance, landscaping, security and roads. Try to negotiate a cap on this charge.

4.4 You will need to maintain your premises to preserve the value of your investment.

4.5 Lighting and heating can be expensive.

• Low energy designs save you money. For example, low energy lighting, and separate heating systems for your office and factory.

4.6 You must pay stamp duty land tax at the time of purchase, at one to four per cent of the price.

• It may be possible to reduce the amount payable by allocating part of the price to any equipment included in the sale.
• Commercial properties worth less than £150,000 are exempt.

4.7 You must pay a land registry fee, which can be up to £800.

4.8 In some cases, the vendor may be obliged or choose to charge VAT on the purchase price.

• Check whether the vendor intends to charge VAT.
• You may be able to reclaim any VAT you pay but the rules are complex.
• Consider how to fund any VAT you have to pay, even if you can reclaim it on your next return.

4.9 Investigate whether you can claim the Business Premises Renovation Allowance. Under the scheme, businesses can claim 100 per cent capital allowances towards the costs of renovating or converting premises in designated disadvantaged areas that have been vacant for one year or more.