CGT on lease extension?

CGT on lease extension?

9:59 AM, 22nd February 2022, About 3 months ago 4

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I owned a house as my main residence, which was converted into three flats and put into my BTL business. The three flats were held under a single title initially. I decided to remortgage the flats and had to put each flat under a separate leasehold title and create a single freehold for the 3 leaseholds.

The leasehold is solely owned by me. The freehold is held jointly with my husband. I own 99% of the freehold and my husband owns 1%. No ones changed hands when freehold/leasehold structure was created.

I am looking to remortgage again and the mortgage company wants a longer lease on the flats as the current lease is about 80 years only.

My question is 1) if the freeholder (I and my husband) decide to charge a premium for extending the lease, will there be a CGT and if yes, how was this calculated?
2) are there any CGT implications for me as the leaseholder?

Many thanks

Jane



Comments

by Ian Narbeth

11:00 AM, 22nd February 2022, About 3 months ago

Jane
As I understand it (and I am not a tax specialist), provided you are married and living together, no CGT will be payable.

As you own 100% of the leasehold and 99% of the freehold won't the gain be in your husband's hands?

A quick email to your accountant will be in order as capital gains need to be reported to HMRC.

by Judith Wordsworth

12:53 PM, 22nd February 2022, About 3 months ago

If you own 100% of the leasehold and are a joint freeholder (no matter what %) why are you charging yourself as leaseholder to either do a Deed of Variation to extend the lease (999 years?) or a Surrender and Regrant to extend the lease. If you don’t charge yourself then there’s no CGT as no monetary gain made I would have thought.
At the same time as doing the lease extension are you amending the ground rent to a peppercorn?

by Sam Smith

16:12 PM, 22nd February 2022, About 3 months ago

The advantage of paying a premium is that I am increasing the capital costs of my business, thereby reducing any potential CGT liability. I do not anticipate any change in ground rent.

by Ian Narbeth

17:03 PM, 22nd February 2022, About 3 months ago

Jane/Sam
I suggest you check with your accountant as there are special rules for dealings between husband and wife and the lower base cost may be carried over. Everyone's affairs are different and you should take professional advice.


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