Generous tax advantages await those willing to put money into commercial property in designated zones. If all goes well you can make an investment which costs you nothing and delivers significant gains over several years. But where theres potential for significant gains theres also risk. In practice many of the schemes based on enterprise zones have failed to meet investor expectations.

Since the 1980s the Government has encouraged business development in certain designated areas or enterprise zones such as Londons docklands.

The features of EZTs are

• Planning restrictions are relaxed.
• Businesses are offered no business rates deals rates holidays.
• Tax relief is available at 40 with no limit on the amount of money that can be invested.
• You should receive rental income once the commercial property is let out.
• If you borrow from a bank to invest the interest you pay on the loan can be set against the rental income thereby minimising your tax bill.

• The schemes are good in theory and appeal to accountants! But evaluate closely before investing. Typical questions ought to be - is the property realistically let-able for a rent sufficient to cover the cost of the bank loan What is the term of the investment 10 years or even 25 years. Are you willing to wait that long Is the scheme being managed by a company which you can have confidence in What is their experience of commercial property Read the prospectus carefully and seek independent financial advice.

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  2009-02-17 00:00:00 © Moneyextra.com