A flat management company was formed to purchase the freehold of 50 flats and granted 125-year leases to its shareholders. The leases currently have an unexpired term of 92 years and it is wished to increase the term by 999 years for which no premium will be charged.
As there is no consideration it is understood that there will be no liability to stamp duty land tax on the extension but the leaseholders would be deemed to have received a dividend equal to the amount by which the lease has been undervalued (presumably the premium that could have been charged). However it is also understood that the extension of the leases would be a deemed disposal by the management company of part of the freehold at market value for capital gains tax purposes calculated on the part disposal basis and that this would not...
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