Cost of lease renewal for Share of Freehold (including CGT)?

LostInSpace189

Hi all,

It feels like I've read every legal and accountancy post under the sun about this, and I'm still not clear on where to go from here. Hoping someone has good advice or knowledge.

I'm currently in the process of buying a flat (pre-exchange), where the freehold is owned by '[Building Name] (Freehold) Limited', which I'll just refer to as the management company. Tenants own a share in the company and three tenants are directors.

The original lease was granted in 2003 for 125 years.

The freehold was bought by the management company in 2005 but did not extend the leases to 999. Rather, they kept them as is.

The company records lists a fixed tangible asset under its financial records that is a similar price to what they paid for the freehold (within 2k).

The articles of association seem fairly bog standard for starting a freehold management company - it describes that it's purpose is to purchase the freehold of the property and conduct management.

I've asked if there is a deed of trust involved at all, but I haven't heard back yet.

The lease is now at 104 years, and I'd like to extend this for peace of mind.

My concern is that, when I do this, I'm going to trigger a Capital Gains Tax event for the management company, who can't cover it. And therefore will look to me to cover this.

Online information has told me so far:

- You're unlikely to pay anything except legal fees, as you're making a disposal to yourself and you can negotiate no premium. Likely around £800.

- You should pay the market value premium to trigger the ESC D39 exemption for CGT to not treat it as a partial disposal. This will be around £6k or so.

- You cannot escape having to pay the CGT, as ESC D39 is strictly interpreted by HMRC. You'll probably pay upwards of £15k.

What can I reasonably expect here? I've engaged a tax specialist in the meantime but wondered if anyone had any advice?

Also - could I get away with just.. not extending the lease? Would letting it run to 94 years impact heavily on the resale value? Would I likely be having buyers ask for the lease extension costs to be taken off the asking price?

All thoughts and advice welcome.

Tom86uk

Hello - did you ever find an answer on this? I’m in the same position and have speaking to numerous lawyers and tax advisers, I’m still baffled! They seem to all be saying technically there may be tax due but are not aware of any clients actually paying it.

Thanks