New lease created to a group company & SDLT

Is this still SDLT exempt?

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Would be grateful for comments this matter I am trying to get to the bottom of.

Parent company owns a residential investment property freehold. The company now plans to create a new long lease on the property in favour of its 100% subsidiary. The subsidiary will then sublet the property to third parties.

Will this transaction be exempt from SDLT under group relief? Whilst I understand the group transfer of property and lease are generally exempt, I am not sure if the same applies for creation of a new lease as well?

Also, will there be any CGT consequences to the parent co or subsidiary co on the lease consideration or deemed lease value (if it was a NIL consideration).

Comments/pointers to the legislation would be most appreciated.

Many thanks

 

 

 

Replies (5)

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Portia profile image
By Portia Nina Levin
26th Oct 2016 10:18

No.

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By Justin Bryant
26th Oct 2016 10:57

PNL is correct and one often overlooked important point is that if SDLT would otherwise arise, SDLT group relief is not automatic and must be claimed within the usual time limits (unlike its s 171 cousin which deems a ng/nl transfer).

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Replying to Justin Bryant:
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By Leo01
26th Oct 2016 16:01

Thanks, but does it mean that, though not automatic, group relief on the new lease can still be claimed here?

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Portia profile image
By Portia Nina Levin
26th Oct 2016 17:12

Yes.

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By gordon1981
09th Mar 2021 16:04

The legislation starts as follows: "A transaction is exempt from charge if the vendor and purchaser are companies that at the effective date of the transaction are members of the same group."
Exempt is key, there is no reference within the subsequent legislation which states that a claim must be made for the relief to apply

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