Lease Extension Subject to Taxation?

  • Filter
  • Time
  • Show
Clear All
new posts

  • Gordon999
    Normally the freehold company will report the income received from lease extension as "annual profit" in its annual acounts which are produced after the year end.

    The profit will be reported in the tax return and about 13 months later the company get a tax bill of around 20%. The remaining 80% of profit can be retained by the company or paid out as dividend to its 3 shareholders.

    For tax year 2018/2019, there is a dividend allowance of £2000 per person which is Nil tax. Any excess amount above £2000 paid in dividend is charged at 7% ( Lower tax band ) or 32% ( higher tax band )

    If the freehold company acts as a "nominee buyer company" , the profit from lease extension belongs to the 3 freeholders ( not company ) and the 3 freeholders report one third profit on their own tax return ,

    Your accountant will advise you which situation applies.

    Leave a comment:

  • hmmlee
    Thank you very much for your response - I appreciate any assistance.
    The only trouble is that there are two companies involved (I should have mentioned this previously!)
    One company is the freehold company (representing the interests of the freeholders - collecting ground rent, leasehold extensions etc).
    The second company is the leasehold company - this company includes all of the 5 leaseholders (including the 3 freeholders who are of course also leaseholders). This company is used for the day to day running of the property - collecting service charges, buildings insurance, property maintenance etc.
    I'm guessing this would alter your initial suggestion? As of course the service charges are dealt with by the leasehold company.

    Leave a comment:

  • JK0
    I'd leave the money in the company, and relieve the directors of paying service charge until such time as the cash is depleted.

    Leave a comment:

  • hmmlee
    Thanks. We acted as a limited company in order to process the lease extension. The limited company comprises the three freeholders..

    Leave a comment:

  • Flashback1966
    Was the lease bought in your personal names or in a limited company?

    Leave a comment:

  • hmmlee
    started a topic Lease Extension Subject to Taxation?

    Lease Extension Subject to Taxation?

    Hi there. I live in a Victorian property which has been divided into 5 flats.
    Several years ago, three of the flat owners (including myself) purchased the freehold. The two remaining flat owners decided that they would not participate in the freehold purchase.
    A company was formed for the three freeholders. This company collects ground rent from the two leaseholders who are not freeholders. We submit accounts to companies house on an annual basis etc.

    Recently one of the two leaseholders (who are not freeholders) decided that they wanted to extend their lease. The original lease was for 99 years. The remaining term on their original lease was 66 years.
    The lease extension was granted for 99 years at a peppercorn rent. A new lease was drafted under the same terms as before (apart from the peppercorn ground rent).
    The leaseholder paid a substantial premium to the freehold company for granting the lease extension.

    Before we divide the premium between the three freeholders, my question is - are we (as the freehold company or as individuals) liable for any tax on this premium that was paid?
    I would be very grateful for any assistance.

Latest Activity


  • Reply to Self assessement questions
    by Gordon999
    The lodger allowance is £7500 p.a and not required to report in tax return.
    08-08-2020, 19:16 PM
  • Self assessement questions
    by Logical.Lean
    I'm just doing my wife and my self assessment.

    We own a property together in the a 90/10 % split.

    The first question online is whether my income from property is greater than £1000.


    I've itemized all costs and interest etc on a spreadsheet...
    08-08-2020, 15:44 PM
  • Reply to CGT evidence
    by Gordon999
    Did you really pay out £40K in cash to tradesmen who gave no receipts ?

    If you just claim the costs for which you have receipts, the capital gain achieved during the rental period = 50% of the total capital gain. What does this figure come to ? .
    08-08-2020, 19:07 PM
  • CGT evidence
    by PaulRs1
    Hi All,

    I’m an accidental landlord and about to sell the house. Lived in it for 4 years and rented it out for 6 (with the intention of moving back, which never happened)

    im aware I need to pay CGT and can claim improvement costs, I basically bought a wreck and renovated it...
    08-08-2020, 13:25 PM
  • Reply to CGT evidence
    by Section20z
    HMRC will require no evidence unless they decide to investigate in which case guesswork will be insufficient....
    08-08-2020, 17:34 PM
  • Reply to CGT evidence
    by theartfullodger
    Accidentally signed an AST?

    No receipts so what would you do if you need to get supplier/contractor back due to bad work? Was this cash in claw?

    Surely at least bank statements or credit card records of expenditure? Can you get confirmation from suppliers? They must have ...
    08-08-2020, 17:01 PM
  • First time self assessment calculation before submittnig?
    by Advice seeker
    Hi all

    This might be a simple one, or not.

    Can someone please advise if this seems correct?

    For 2019-2020 I have the following on the HMRC form:

    £9715 income
    £2558 total allowable expenses

    Profit £7517

    I believe mortgage...
    15-07-2020, 20:04 PM
  • Reply to First time self assessment calculation before submittnig?
    by Advice seeker
    I am almost there with my figures now. Works out about 9k odd, plus 10% penalty and there is interest :/ so am hoping 10k roughly.

    Would be interested in your opinions actually as a business model or whatever you want to call it...

    Over the eleven years since I started the...
    08-08-2020, 16:25 PM
  • Reply to Tax to Pay on Lease Extension
    by jpkeates
    flyingfreehold I didn't know that - thanks...
    08-08-2020, 11:39 AM
  • Tax to Pay on Lease Extension
    by divadee
    Myself and partner own the freehold to the building we live in, this is in the form of a limited company. We were accidental freeholders as the previous freeholder wanted to sell and no one else living here wanted to buy it so we bought it to have some control over the service charges etc....
    07-08-2020, 09:48 AM