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Does a lease or licence to occupy land need to be writtten for s.175 CAA 2001?

Does a lease or licence to occupy land need to...

I have a client who owns a trading company with his wife. The company's trading business operates from a building which the company has built on land owned personally by my client.  The company has full occupation of the land in question to the exclusion of others.  The company pays rent to the client for the use of the land but possibly there is no written document in place to show that a lease or licence to occupy exists.

The company has recently incurred substantial expenditure on extending and fitting out the building from which it operates, and my query is whether the absence of a written document to support its interest in the land stops the company from having a relevant interest in land as required by s.175 and s.176 of CAA 2001.  Can anyone help?


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14th Jun 2014 08:56

The definition at Section 175 includes both a lease and a licence and although it is strictly a legal point on which a lawyer should advise I imagine that the payment of rent alone is evidence of at least a licence if not a lease. However why not put the matter beyond doubt by preparing a lease.

What I would be more worried about is that in the absence of any legal document specifying that the company owns the building and has a right to access to the building (a lease). Although again it is a legal point (and I am not a lawyer) it is my understanding that in the absence of such a document (which needs to be a deed) it could be argued that the company has simply enriched the landowner by the value of the building that it has erected on land that the owner of the company (shareholder) owns.  

HMRC might want to argue that the tax consequences of this is that the company has made a distribution to the shareholder equal to the value of the building and fixtures. Even worse if the shareholder is a director it might be argued that the value of the building should be treated either as remuneration or a benefit in kind. 

The client should take legal advice to prepare a deed showing that although the land belongs to the client the value of the buildings erected on the land belong to the company. A lease is also needed to give the company the right to access across the land that the shareholder owns and to occupy the buildings. 

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