A client company has four flats which it rents out, three of which are to directors. The directors have decided not to charge themselves ground rent, demanding it only from the fourth tenant. The lease requires ground rent is payable by all the flats. My interpretation of this situation is that the company still has income in the amount of the total ground rent and tax must be paid on this total figure (less allowable expenses). The directors believe that the company is only liable to tax on the ground rent paid. Is there any merit to their argument?
02nd Apr 2012 11:55