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Our client, a property management company owns a block of 16 flats freehold. 40 years ago, each flat was granted a 99-year lease. Recently, difficulties have been experienced by purchasers endeavouring to obtain a mortgage and consequently the directors of the company are considering extending the leases to either 125 or 999 years.
If the grant of new leases proceeds, the legal costs will be met by the lessees who each own one share in the company (6.25%). None of the lessees pay ground rent.
Our client a property management company owns a block of 16 flats freehold. 40 years ago each flat was granted a 99-year lease. Recently difficulties have been experienced by purchasers endeavouring to obtain a mortgage and consequently the directors of the company are considering extending the leases to either 125 or 999 years.
If the grant of new leases proceeds the legal costs will be met by the lessees who each own one share in the company (6.25%). None of the lessees pay ground rent.
The five directors are concerned that there may be tax implications surrounding their proposal First is it correct that there is no capital gains tax liability on a deemed value of each new lease? Secondly would the company directors be liable for tax on any benefit in kind in these circumstances? Readers' experiences are welcome.
Query T16 915...
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