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lease extension premiums taxable?

ground rent investment leases

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I have been asked if the income received from a premium to extend a long lease is taxable and whether it is treated as capital or income.

A small freehold block has 4 seperate flats all sold on 125 year leases back in 2010. There are ground rent reviews every 25 years.

If a tenant asks to extend their lease (which is their right) for say 25 years to 150 years and agrees to pay a £7,500 premium how is this taxed  i.e. capital gains or income tax?

Does it make any difference if the property is owned by an individual or a company?

I have told the individual to speak to their tax adviser but I would be interest in knowing from a personal perspective.

Any comments would be appreciated.

 

Replies (6)

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By Wanderer
31st Jul 2021 09:56

Brash, you seem to spend your life answering queries for 'friends' 'colleagues' & others who are not clients.

"A colleague of mine five years ago.."
"A friend of mine own 50% of a private limited..."
"I would appreciate some feedback regarding a tax situation on behalf of a personal female friend."
"A company I am helping out..."
"A colleague has been offered 5% shares..."
"A friend of mine 5 years ago bought..."
"A friend of mine has been going to college and ...."
"A colleague of mine jointly owns a private ...."
"A friend purchased £8k of shares in a proposed EIS scheme ..."

& now this one where you apparently aren't the tax adviser. Also putting in statements like "Does it make any difference if the property is owned by an individual or a company?" well you really should establish the facts first.

I could help provide an answer to your question but unfortunately I am too much of a cynic.

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Replying to Wanderer:
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By Tax Dragon
31st Jul 2021 16:39

I like this comment:

"Basically, you have come to the point of stopping freeloading and starting paying."

Made to the OP.

By pacta.

On 30th Oct 2016.

Nearly five years later, still at it.

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Replying to Wanderer:
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By brash
01st Aug 2021 11:07

a

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By David Ex
31st Jul 2021 11:21

brash wrote:

I would be interest in knowing from a personal perspective.

A good way of learning more about a topic and developing research skills is to have a go and see how far you get.

Do a bit of research and come back with your thoughts and I’m sure someone will comment on your findings.

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By Paul Crowley
31st Jul 2021 22:27

There are rules
Not difficult to find
If you do not want to find or research then ask your friend what the accountant said.

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By brash
01st Aug 2021 11:08

brash wrote:

I have been asked if the income received from a premium to extend a long lease is taxable and whether it is treated as capital or income.

A small freehold block has 4 seperate flats all sold on 125 year leases back in 2010. There are ground rent reviews every 25 years.

If a tenant asks to extend their lease (which is their right) for say 25 years to 150 years and agrees to pay a £7,500 premium how is this taxed  i.e. capital gains or income tax?

Does it make any difference if the property is owned by an individual or a company?

I have told the individual to speak to their tax adviser but I would be interest in knowing from a personal perspective.

Any comments would be appreciated.

 

Thanks (0)
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