Is tax due on a buyout fee for surrendering my regulated tenancy?

Brie

Bookworm105 said:

Brie said:

I'm boggled to think that an accountant has told you CGT would be applicable.  You didn't buy the place (unless I've missed something) so you can't be selling it for a profit, so no CG.

stand by to be boggled then because the accountant knows more about tax than you in this instance.
Whether their answer is correct in respect of a residential (rather than commercial) lease is a different question. 

Very happy to agree that generally accountants know much more about tax than I do!!  I just didn't think it applied here.  Perhaps the OP needs to have a proper talk with a tax expert to confirm the situation.  

Also - I think there's a lot of the buyout being offered to avoid extra legal hassles in forcing the OP out to enable an easier sale for the LL.  How much does it take to issue the right notice?  What things might need to be done to make that legal?  Many of us have heard so many stories about tenants waiting til the last day to tell the LL that there isn't a gas certificate or whatever.  In fact we tell them to do so!!!

user1977

Brie said:

Bookworm105 said:

Brie said:

I'm boggled to think that an accountant has told you CGT would be applicable.  You didn't buy the place (unless I've missed something) so you can't be selling it for a profit, so no CG.

stand by to be boggled then because the accountant knows more about tax than you in this instance.
Whether their answer is correct in respect of a residential (rather than commercial) lease is a different question. 

Also - I think there's a lot of the buyout being offered to avoid extra legal hassles in forcing the OP out to enable an easier sale for the LL.  How much does it take to issue the right notice?  What things might need to be done to make that legal?  Many of us have heard so many stories about tenants waiting til the last day to tell the LL that there isn't a gas certificate or whatever.  In fact we tell them to do so!!!

It's a regulated tenancy, the landlord can't serve the "right" no-fault notice because there's no such thing.

MacSue

mybestattempt said:

You may find this helpful:

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg72300

I did already look there but couldn't find any clarity. I can see that my situation is listed in the first section - "

• Where the landlord and tenant agree that the tenancy should end in return for compensation being paid to the tenant."
  
  But then it goes on to go deeper into agricultural, Business and Licensed premises and I couldn't find more about my situation, got a bit lost as it carried on...

MacSue

swingaloo said:

Better to keep to one thread on the subject.

Thanks. I posted originally in the Rents and property section and someone there suggested that there may be more people with knowledge in the Cutting Tax section, hence the second post. Sorry if that was the wrong thing to do and caused confusion!

MacSue

user1977 said:

Brie said:

I'm boggled to think that an accountant has told you CGT would be applicable.  You didn't buy the place (unless I've missed something) so you can't be selling it for a profit, so no CG.

"I didn't pay anything when I acquired it" isn't a magic exemption from CGT when you receive a sum from a property's sale. It's the price they're receiving for surrendering their leasehold interest, I don't see why it wouldn't generally fall within CGT liability - you (hopefully) understand why it would if it were a "normal" long leasehold interest which they were selling or surrendering.

But if it's been their main residence throughout, then private residence relief applies and nothing is actually due.

Thanks for this, it does seem to make the same points that a friend's accountant did. For clarity's sake, I'm not surrendering a leasehold interest but a regulated tenancy. I don't own the leasehold. I have no idea if this makes any difference? 

MacSue

Brie said: 

Very happy to agree that generally accountants know much more about tax than I do!!  I just didn't think it applied here.  Perhaps the OP needs to have a proper talk with a tax expert to confirm the situation.  

Also - I think there's a lot of the buyout being offered to avoid extra legal hassles in forcing the OP out to enable an easier sale for the LL.  How much does it take to issue the right notice?  What things might need to be done to make that legal?  Many of us have heard so many stories about tenants waiting til the last day to tell the LL that there isn't a gas certificate or whatever.  In fact we tell them to do so!!!

Thanks. Just for clarity I have a regulated tenancy which means they can't force me out. If they sell I will have a new LL. They have not put any pressure on me at all, in fact I have to chase them to say I am interested. They are a big company and I think have made the same offer to many regulated tenants to see who might be interested. 

I don't quite understand your last point about gas certificates! 

Bookworm105

Brie said:

Bookworm105 said:

Brie said:

I'm boggled to think that an accountant has told you CGT would be applicable.  You didn't buy the place (unless I've missed something) so you can't be selling it for a profit, so no CG.

stand by to be boggled then because the accountant knows more about tax than you in this instance.
Whether their answer is correct in respect of a residential (rather than commercial) lease is a different question. 

Very happy to agree that generally accountants know much more about tax than I do!!  I just didn't think it applied here.  Perhaps the OP needs to have a proper talk with a tax expert to confirm the situation.  

Also - I think there's a lot of the buyout being offered to avoid extra legal hassles in forcing the OP out to enable an easier sale for the LL.  How much does it take to issue the right notice?  What things might need to be done to make that legal?  Many of us have heard so many stories about tenants waiting til the last day to tell the LL that there isn't a gas certificate or whatever.  In fact we tell them to do so!!!

you have missed the significance of it being a regulated tenancy, not an AST. It is bending the wording a bit, but in essence a regulated tenant is much the same as the original meaning of "sitting" tenant, ie a tenancy for life. 

Fundamentally the valuation of a tenanted property remains the same, a multiple of the rental profit, bearing in mind that a regulated tenancy has the right to court imposed "fair rent", which an AST does not. So a regulated tenancy would typically be worth less as it produces less income.

The other aspect of the valuation - how soon can the property be re-marketed (higher rent) or sold, can be very different. With a regulated tenant the valuation owes more to how close the tenant is to death because waiting for them to voluntarily end the tenancy (die!) can entail a short or very long wait. Hence in OP's case he is being offered a substantial bribe to voluntarily leave before he dies as there is no other practical way to get him out as LL initiated eviction is very difficult (S21 not applicable) as mandatory grounds are very specific and discretionary grounds require a court to do what it typically does not, side with the LL .

user1977

MacSue said:

user1977 said:

Brie said:

I'm boggled to think that an accountant has told you CGT would be applicable.  You didn't buy the place (unless I've missed something) so you can't be selling it for a profit, so no CG.

"I didn't pay anything when I acquired it" isn't a magic exemption from CGT when you receive a sum from a property's sale. It's the price they're receiving for surrendering their leasehold interest, I don't see why it wouldn't generally fall within CGT liability - you (hopefully) understand why it would if it were a "normal" long leasehold interest which they were selling or surrendering.

But if it's been their main residence throughout, then private residence relief applies and nothing is actually due.

Thanks for this, it does seem to make the same points that a friend's accountant did. For clarity's sake, I'm not surrendering a leasehold interest but a regulated tenancy. I don't own the leasehold. I have no idea if this makes any difference? 

The tenancy is a lease. Your interest in it is a leasehold interest.

MacSue

user1977 said:

The tenancy is a lease. Your interest in it is a leasehold interest.

Thanks for this. I find this hard to understand. I accept it but as I've been doing a lot of reading about leasehold ownership and share of freehold, this confuses me. I guess I need to do some more reading.

gelato_cat

I'll merge this thread with your other one, so that everything is in the same place