I have a client who is the sole director / shareholder of a ltd co. The co has acquired the freehold of a property and carved it into residential and commercial units.
A long lease has been granted to the director for the residential units now at a value which takes into account completion of upcoming development work.
3 queries (tax and accounting)....
1. I am comfortable with calculating the gain in the company on part disposal on an A/(A + B) basis. Client needs to come up with a value for freehold reversion. However, can build costs (not incurred at time of granting of lease) be accrued on calculating my disposal cost>
2. Can the 3 freehold properties now out on a 99 year lease be recognised as an investment property? Ground rents are still being collected.
3. What are the company accounting entries for the lease premium? Dr bank / Cr disposal of investment? Is there a freehold (investment property) disposal in lieu of the element which is long leased? Or does my balance sheet remain untouched?
Any thoughts greatly appreciated.