A grants a 20 year lease to B under which B agrees to pay rent of £100 pa. Subsequently (soon after) A grants an interposing lease to C who agrees to pay A £1 per annum but he (C) will benefit from the terms of the original lease granted from A to B. C is connected to A. What are the tax considerations??
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Interposing lease?
Are you saying that A is granting C a lease of the property that has already been leased to B, but subject to the lease to B.
So C will pay A £1 per annum, but will receive £100 per annum from B?
Is there not, therefore, an implied premium, as per CG70825? I don't think there's an income tax charge on an implied premium though.
I researched
This before and thought the answer was a CGT charge only.
Unfortunately I don't recall much more than that.
S. 165(7)
Don't you have to get past s. 165(2) first? Leasing an asset isn't a trade, profession or vocation.
Or is it agricultural land?
Yes
Then s. 165(7) operates to let you have relief under s. 165 to the extent of the undervalue of the grant.
The reason for there not being any deemed income is that A got deemed income on the first grant.
If A's an individual and C is their spouse or civil partner, then there's potentially a settlements argument. There's also a (more tenuous) settlements argument if C is a limited company owned by A and/or spouse/CP. Not sure if HMRC would take it up though.
Quick question please on similar point, different situation
3 siblings grant new 20 year lease to their trading limited company for £1 per year. Imputted premium
http://www.hmrc.gov.uk/manuals/cgmanual/CG70825.htm
http://www.hmrc.gov.uk/manuals/cgmanual/CG70903.htm
seem to apply but can they get s165 TCGA 1992? Perhaps argument that "interest in" land but lease may be separate asset and so not asset used for purpose of trade as it has just been created?