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Many business owners have bought commercial property that has been fully or partly occupied at various times by their trading concerns, and rent may have been charged for the use of the property; either the property owner has been paid rent by his business or by other third parties. HMRC have just announced that new rules will apply to the way capital gains tax will be applied on the disposal of these properties on or after 6 April 2008.

Since that date, all capital gains are taxed at a flat 18%. There is one notable exception. If the disposal qualifies as the sale of a business asset you may be able to claim entrepreneurs' relief. If you can claim, the first £1m of qualifying lifetime disposals are subject to capital gains tax at a reduced rate of 10%.

Generally speaking the disposal of a business property should qualify for entrepreneurs' relief as long as it is sold in conjunction with the sale or cessation of a business, or within three years of that date.

Obviously, if you have purchased a property for the purposes of running your own business you may feel that this relief is available to you when you sell the property. Unfortunately, the position of certain property owners, particularly those who have charged rent to their business, may not be so straightforward.

The issues that affect the availability of entrepreneurs' relief when commercial property has been rented to a business, are complex.

Please give us a call if you think you may be affected.

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