Stamp Duty/CGT and extending lease on flat purchase

[ian5708]

Hi,

I hope someone can give me some solid advice.

I own a flat which I rent out and I'm just about to buy a second flat from my elderly great Uncle. I have been living overseas for a number of years but I'm now back in the UK living with my parents and I will become a resident again in the UK for tax purposes.

The asking price on the flat located in Coventry with the current lease was £65K and he has agreed to sell it to me as a cash buyer for £60K. He has moved into sheltered housing. I have the support from the rest of the family and those named in his will.

There is 51 years remaining on the lease and the landlords agent has suggested budgeting for around £12-14K for a 90 year lease extension with a peppercorn ground rent.

If I was going to buy it without my uncle extending/renewing the lease, I would have to wait two years of ownership to renew it myself. We have therefore reached a decision for him to extend/renew it prior to the sale.

My question is, from a financial point of view should I pay £60K on paper for the purchase of the property and pay my uncle the cost of the lease renewal seperately as a private arrangement (if legal to do so) or should/must I pay him £60K plus the cost of the lease extension upon completion of the sale?

I do not not fully understand the tax implications for each option other that the less I pay on completion, the less Stamp Duty that I pay at 3% BUT the more CGT I will likely have pay when I sell the property a few years down the track.

In relation to CGT, I know that I could factor in the lease extension cost as an expense if I was to pay it myself, but could I do this if its my Uncle who is renewing the lease before sale and not me?

Thanks in advance

Ian

[ian5708]

OK, I get my answer from another forum.

Basically I get my uncle to initiate the lease enfranchisement and issue a section 42 notice. I then purchase the property and then I continue with the lease enfranchisement/extension and pay the landlord for the lease entension. Happy days.