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Taxation on the sale of residential lease
jambutty1
Posts: 2 Newbie
in Cutting tax
Hi, this is basically a question on taxation. Its possibly a complicated one but I'll try to keep this as brief as possible.
Scenario is; my parents live in a rented property (the own no properties and have no major assets). They have rented this property for around 30yrs. They have a lease that is guarenteed to them for life. If someone wants them to surrender their lease they are effectively required to buy them out. The owner of the freehold is selling the property at present and the prospective buyer is looking at paying my parents to surrender their lease, at a figure of approximately £350,000 (the property in question is quite substantial).
Now this money is basically going to have to last my parents for the rest of their lives AND be used to buy outright an alternative property to live in. My big question is what taxation (if any) would they be liable to upon receipt of the £350,000. I know that if they were selling a property they wouldn't be liable to pay any tax. However as it is a lease are they liable to CGT or indeed any other taxation? If so can anyone suggest any ways of making the sale of the lease as tax effective as possible?
Help is urgently needed on this one!! ASAP!!
Scenario is; my parents live in a rented property (the own no properties and have no major assets). They have rented this property for around 30yrs. They have a lease that is guarenteed to them for life. If someone wants them to surrender their lease they are effectively required to buy them out. The owner of the freehold is selling the property at present and the prospective buyer is looking at paying my parents to surrender their lease, at a figure of approximately £350,000 (the property in question is quite substantial).
Now this money is basically going to have to last my parents for the rest of their lives AND be used to buy outright an alternative property to live in. My big question is what taxation (if any) would they be liable to upon receipt of the £350,000. I know that if they were selling a property they wouldn't be liable to pay any tax. However as it is a lease are they liable to CGT or indeed any other taxation? If so can anyone suggest any ways of making the sale of the lease as tax effective as possible?
Help is urgently needed on this one!! ASAP!!
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Comments
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Leasehold properties are treated the same as freehold in terms of tax
Your parents' solicitor will confirm.Trying to keep it simple...
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Sorry i think you may have misunderstood my initial post (well I did waffle on a bit), my parents do not own the flat (on a leasehold basis) they're simply tenants with a tenancy agreement. However it is a very unusual lease, in the sense that its guaranteed for life (I think the term might be an assured tenancy). Ordinarily its of no tangible value. The only reason it has any value is that they are sitting tenants and the persons wishing to buy the building wish to effectively pay my parents to surrender their agreement and move out so that they can develop the building. Can you offer any further advice Edinvestor? It would be greatly appreciated.
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