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.