Tax payable on lease extension for freeholders

Tom86uk

Hello,

I can see a number of other posts on this matter but no one seems to have reached a conclusion.

We are 5 freeholders, with 90 year leasehold interests in our flats (held via a company). We wish to extend these interests to 999 years.

We have spoken to law firms and tax advisers all with very different views on the tax implications of such an extension (some not aware of any tax implications, others say CGT is due and others corporation tax).

Has anyone actually extended their leasehold interest and was any tax due?

Thank you!

DullGreyGuy

Have those that have said taxes are due explained why? Some may not be willing to give you a handheld explanation unless you are paying for their advice. 

Were it an arms length contract (ie the freeholder was the typical faceless corporation) what would the sorts of values you'd be having to pay the freeholder to extend the lease?

I'm no tax expert but could see arguments either for corporation tax, ie the tax the company would have paid on the monies received to extend the leases given the general principles of arms length contracts between related parties. Possibly CGT on a personal level having received an increase in value of the property via a transaction for which no consideration was paid... though in my mind it would be the difference in value which may not be that much in a share of freehold situation. 

Can't help but can bump the thread... coincidently a friend is in a similar situation also with 90 years to run now and they looked into the same a couple of years ago but were also told taxes applied and so didnt proceed. 

Olinda99

This reasin seems to be both are right! This might help

https://www.penningtonslaw.com/news-publications/latest-news/2024/how-to-handle-tax-on-residential-lease-extensions