My Grandparents held 99 year leases on four modest flats that they built in North London. These have each generated £10 pa in ground rent ever since! When they passed to my parents, probate valued them at 10 times the annual ground rent making each worth £100. This was accepted back in 1999. Any subsequent extension renegotiations that have taken place were declared for tax purposes.
These leases have now passed to me and were again valued on ground rent for probate purposes recognising the potential for Income or CG Tax in the future if a homeowner sought an extension. However, HMRC have valued the leases (ranging from 75 to 88 years term outstanding) at £85,000 combined giving an additional IHRT liability of over £34,000! What is the precedent here?
Fundamentally I have problem with valuing leaseholds like this. Most assets like property or shares can be disposed of under market conditions and at a time that suits the seller. Neither factor applies here. We cannot sell to pay the bill. The only sensible purchaser is the householder and they are under no obligation to buy at any time during term. If they do, I will pay the tax on the actual sum realised. If they don't the property reverts to us (though this is unlikely to be the legal position at this point of time) but this is something that maybe my Grandson has to concern himself about. In the meantime, new grandparents have to pick up a tax bill on an unrealisable asset.
Advice please.
- Home
-
Tax News
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice and Methods
- Professionals in Practice & Industry
- General
- TaxationWeb
-
Tax Articles
- Budgets and Autumn Statements
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings and Investments, Pensions and Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations & Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practice & Methods
- Professionals in Practice & Industry
- General
- Tax Tips
-
Tax Forum
- Income Tax
- Business Tax
- PAYE and Payroll Taxes, National Insurance, NICs
- Company Taxation
- Savings & Investments, Pensions & Retirement
- Capital Gains Tax, CGT
- Property Taxation
- Inheritance Tax, IHT, Trusts & Estates, Capital Taxes
- Tax Investigations and Enquiries
- VAT & Excise Duties
- Stamp Duty, Stamp Duty Land Tax, SDLT
- International Tax
- HMRC Administration, Practices & Methods
- Professionals in Practice & Industry
- General
- Tax Jobs
- Get in Touch