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What is the tax treatment if leaseholders acquire a share of freehold?
I act for a company which was set up to buy the freehold of a block of flats about ten years ago. It exists purely to hold the freehold interest of the property and the actual management of the block is looked after by a third-party management company which charges each flat owner a share of the service charge.
The company’s only income is ground rent of a few hundred pounds each year (mutual trading). There are no expenses other than my fees to file accounts with Companies House. The balance sheet shows the original capital sums contributed by each participating leaseholder who became directors and shareholders. This is about £80 000 – there being ten flats of which six leaseholders acquired a share of the freehold.
The original 99-year leases that were granted in 1974 now have only about 50 years to run. Consequently if the individual flat...
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