Tax on grant a lease - no proceeds

Tax on grant a lease - no proceeds

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following on from my earlier question concerning ER.

My client is granting a lease for nil proceeds to a company.

Then selling the F&F to that company

then selling the building, subject to that lease, to another independent company which will then be the new landlord for the buyer of the business.

ER now seems fine (sale and cessation of partnership business followed by sale of property)

But will there be tax on granting of a lease? I don;t think so but Friday afternoon panic. Nil proceeds so how can there? Before I worry about what A or B means in teh A over A+B, do I need to worry at all if proceeds are nil?

This granting of the lease is just to protect the new buyer of the business, and to make it a TOGC.

Many thanks.

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By carnmores
31st Aug 2014 06:49

you say nil proceeds
But what about the NPV of the rents, I think its one of those A/A+B calcs as you say

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By Steve Kesby
31st Aug 2014 11:18

I assume...

... that the lease has been granted on arm's length terms, since the freehold is then to be sold to an unconnected third party?

In that case, the rent is income and so its NPV is not disposal proceeds. The disposal proceeds are £0, and the A in A/(A +B) is zero. That simplifies to 0/B, which I don't know how to calculate, even if I knew what B was. neither do I know what to do with it, since there aren't any sale proceeds

To the extent that there's a disposal, it's a small disposal and you can deduct the sale proceeds, £0, can simply be deducted from the base cost.

Are you sure you have a TOGC? Will the vendor actually be carrying on the property rental business before selling the building? Get paid for confirmation from an expert that what you're doing will actually work, so that it's on their PII.

I assume that the point is that the company will carry on the trade before the sale of the freehold, so that the sale of the building happens after cessation of the unincorporated business for ER purposes? I'm fuzzy on the original question.

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