How do I create a lease without triggering CGT or SDLT?

Reply to the comment left by Christopher Rogal at 15/05/2021 – 15:54
In that case you are doing exactly what we did, as we were simply wishing to remortgage.

Our then lender, Yorkshire Bank, was leaving the property business and was pulling our loan and there wasn’t at the time a viable alternative to remortgaging the whole development. Nowadays I’d go to Paragon and simply remortgage using a single loan.

So yes, just draft up all the leases showing your landlord as the company and the leaseholders as you and your partner and a transfer of the freehold.

Our solicitor at no time perceived that this wasn’t perfectly ordinary and there was never any thought of any CGT being due on the transfer.

The TR1 form showed the value of the transfer as being £1000 and that is the relevant information as far as CGT is concerned.

You’re overthinking it. If it worked the way you are suggesting your transaction would look like this.

1) Transfer full freehold site to company, pay CGT & SDLT & solicitors fees
2) Create leases and transfer individually back to yourselves, pay solicitors fees for four transactions plus CGT & SDLT on the transfers.

It doesn’t work that way, so stop worrying. It will also be a far simpler process for you because it sounds as though you don’t have lenders involved to complicate things. If you are planning on later selling individual flats it is definitely advisable to get this process done up front as you are thinking of doing.

Reply to the comment left by Kate Mellor at 16/05/2021 – 04:26
Thanks Kate, that’s very helpful information.

Thanks all for your comments (ps Bernie you wrote the leases for me). Having reread my question I realise my mistake was saying we were selling 4 flats it should have read we have sold ( completed) on 4 flats and therefore the remaining flat and freehold are still in personal names. At the time we completed the project we were advise as is being mentioned that if we transfered the freehold into a ltd co it would trigger SDLT and CGT and also the existing mortgage was a hurdle. So it was kept in our personal names as a property we had long held and therefore was never purchased as a development in a LTD Co as I would today.
So I find that now not wanting to sell the remaining flat but wanting to mortgage it who do I create a lease to make the flat Mortgageable without triggering CGT & SDLT My thoughts are lease in my partners name with 50% beneficial interest to me so we are still equal owners but I am not sure even this would not trigger taxes, Or sell the freehold to a ltd co but this I believe would require me offering it to the other flat owners first ? and how do you calculate what price would i have to offer it to them at ?

Reply to the comment left by Kate Mellor at 16/05/2021 – 04:26
Great strategy ! Shame I did not know about this one before all our leases were written/transfered
Thanks Sean

Reply to the comment left by gerosean at 18/05/2021 – 20:26
What about remortgaging with Paragon? They will (I believe), lend with the flat being freehold.

If you change the freehold ownership you will potentially have implications with the existing leases which show you as the freeholders. I’m not sure whether that would raise any issues or not, but I’d want to check. Is the transfer equal to a sale?

I would still think you can split your titles without paying CGT or SDLT, but as you have a lender you would almost certainly need to do it on completion of your remortgage. It’s still the same thing that we did, only with just one lease.

Think of it like this, you split the freehold and leasehold titles onto two separate title numbers. Both are in the same names. No transfer has taken place, but you have split the titles (step 1). You then have a freehold title with very little value. You then transfer the freehold title into a company name (step 2). Goal accomplished and no CGT or SDLT payable.

Your current lender may even allow you to do this now for a fee. They will certainly require security over the freehold as well. I imagine you’d need to arrange this through an intermediary who has access to more senior members of the lending team. Consumers don’t tend to have as much flexibility as business borrowers.

Effectively this is what you’re doing when you split the titles on completion, you’re just skipping a paperwork step. Neither our solicitor nor our accountant had any issues with it or suggested it would produce a tax liability, so if that’s what you’re being told then question it.

Reply to the comment left by gerosean at 18/05/2021 – 20:09
There are lease value calculators online.

Reply to the comment left by Kate Mellor at 16/05/2021 – 04:26
Thanks Kate, very helpful information in your replies.
I am on a similar situation.
We (my partner and I) recently converted a rented house ( having 30% of current GDV with an existing mortgage) into three flats. We want to re-mortgage with a new lender after creating leases. Can, we follow the following steps to minimise our tax exposures: Freehold transferred from joint names to just my name; I grant my partner the leases; The freehold is transferred to a newly formed company; and finally, the leases are transferred to joint names.
All this happens all on the same day on the completion of re-mortgage and get these registered after the final step.
Do you think this is possible. with a new lender and no CGT and SDLT to pay at Market value? We don’t want multi block arrangements though.
Thanks

Reply to the comment left by Ratnadeep Palit at 27/08/2025 – 17:13
You don’t need the middle step. Just get your leases drafted, create a company and during the remortgages (are you selling any, or remortgaging each flat individually?) basically you’ll either have to come to an agreement with your current lender to peel off security as each remortgage completes (they’ll want ALL the funds to release it and they’ll charge you a legal fee-IF they’ll even entertain it!), or you’ll have to arrange for all remortgages to complete on the same day. You may not be able to use the same lender and solicitor for each remortgage as your new lender will have limits on the number of mortgages in the same development or the same postcode that they will mortgage. (They all have some sort of policy on this). You may be okay with just three properties though.
Then your solicitor will prepare a TR1 transfer of the freehold to your new company. The sale price will be well below the tax thresholds as freeholds with long leases are not terribly valuable. And your remortgages will be as leaseholds with yourselves as the leaseholders. All done on the day of completion.

Reply to the comment left by Kate Mellor at 28/08/2025 – 12:26
Thanks again Kate, very helpful information.
Regards