Transfer of a lease within a group

A group of companies was carrying out a residential development. The final phase was a 50-storey tower block. The group wanted to transfer that building to a special purpose vehicle (SPV) to ring fence risks and potential liabilities associated with the development as well as to provide greater financial flexibility. After consulting its tax advisers the group carried out a series of steps on the same day so that the SPV would be treated as acquiring it at market value and achieving a ‘significant’ corporation tax advantage. In brief the company which owned the property granted a 999-year lease to another group company B64. The taxpayer which had been incorporated to be the SPV then bought the shares in B64 and the lease was transferred to it.

After an enquiry HMRC concluded the steps did not result in a tax advantage and...