CGT when you own both freehold and leasehold?
My wife and I jointly own the freehold of a building and I own the four individual leasehold flats contained in this building (as, I hope I am right in saying you are not allowed to own both the freehold and the leasehold of the same building)
If we want to sell one of the leasehold flats can we use both of our CGT allowances against the capital gain?
We run this jointly as a business and we both share the income, the only reason both names are not on the leasehold is for the reason above, as stated by our solicitor when he set up the leases for us 10yrs ago.
He has said that we could get around this with a declaration of trust but as he isn’t a tax adviser has suggested I confirm this first.
Anyone come across this situation before?
Many thanks
Martin
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Member Since February 2011 - Comments: 3453 - Articles: 286
4:02 PM, 12th October 2018, About 8 years ago
Dear Martin,
Mark is traveling at the moment but I have asked him to look at your question for us when he is next at his computer.
When you say you run it as a business can I ask if it is registered with UTR codes with HMRC or as a Ltd company?
Member Since December 2014 - Comments: 18
8:45 AM, 13th October 2018, About 8 years ago
Hi Neil
By run as a business is meaning we both contribute time to the running of the property business and we both share the income tax liabilities on our personal tax returns.
I have a separate ltd company but this isnt involved with the properties.
Member Since January 2011 - Comments: 12207 - Articles: 1403
9:36 AM, 15th October 2018, About 8 years ago
If you have been holding 50% of the beneficial interest in the properties for you wife then you will be able to utilise both of your annual CGT exemption allowances.
However, from what you have said, it appears that might not have been the case.
If may be possible for you to make a declaration of Trust now, however, you will need to be careful that SDLT is not triggered. If there is a mortgage of more than £250,000 secured against the property then you may wish to consider sharing a smaller percentage of the beneficial interest to ensure SDLT is not triggered, i.e. a percentage with equates to less than £125,000 of mortgage consideration.
Member Since December 2014 - Comments: 18
9:40 AM, 15th October 2018, About 8 years ago
Reply to the comment left by Mark Alexander at 15/10/2018 – 09:36
Hi Mark
Mortgages are around £100 k on each leasehold flat
Declaration of trust is the route we were thinking – its just my solicitor didnt want ‘ to give us tax advice’ so suggested we take advice elsewhere prior to him doing a declaration of trust !!