Readers' forum : Property project

My client’s daughter owns a flat in a block where the occupants have joined together to form a company to build four penthouses. My client has agreed to provide funding for the construction project. He will make available up to £3m to be drawn down over the next year. The intention is that he will receive a return of £600 000 on the sale of the penthouses regardless of the amount loaned.

The client’s loan will be secured against the value of the new flats. It seems to me that structuring this as a loan would create a deep discount security and lead to a charge to income tax on the full amount on redemption.

Is it possible to ensure that his return on the investment is taxed as a capital gain?

Query 19 100 – Top Banana.

Reply by Bramble

For a return on investment...