I'm hoping someone may be able to help with the following:
My client owns two ltd companies, one being a subsidiary of the other. The top company owns the freehold of a property which is rented to the subsidiary, both companies are in the same VAT group.
To free up cash my client is entering a sale and lease back of the property to a third party, with the subsidiary remaining in occupation. The purchaser wants the property to be treated as a TOGC to avoid the additional SDLT, however my opinion at the moment is that this is not a TOGC because:
- Top co rents the property to sub (under no formal contract) however the VAT group ultimately operates a business from the premises so there is no property rental business being transferred. In HMRC's eyes does the VAT group supplies veto that of the intercompany rent?
- Third party will enter a lease with the clients top co, not the subsidiary.
- The third party has suggested entering a lease in advance of the transfer, but I don't see how this will help achieve TOGC status.
I have asked the third party to provide written advice from their advisors as to why they believe it's a TOGC but I haven't received anything yet.
Thanks in advance. James