LEASE EXTENSION FUNDS RECEIVED

[JIM ROBINSON]

Dear TW group,

As a50 year long freeholder, the lease holder has approached me to extend his lease on his flat for 99 years. We have agreed on the amount of £50,000.
It was the last thing I was expecting and I am very unwell with the worries that this income will cause to my state pension and inland revenue purposes.
Am I liable to pay CGT on this? If so at what rate?
Where do I even begin?
Please HELP, all and any advice gratefully received.
Thanking you all in advance for helping me in any way that you can.
Kind regards.

[bd6759]

It wont affect your state pension

The grant of a lease, or the extention of an exisiting lease, is a disposal for CGT purposes. You will be liable to capital gains tax on 50,000 (less your costs) at 18% and/or 28% depending on the amount of your other income.

If the lease was extended after 5 April 2016, you will need to complete a 2016-17 tax return after April 2017. If it was extended before then you need to contact HMRC now, although contacting a tax advisor first may be helpful.

[Ian McTernan CTA]

If you are claiming means tested benefits other than the State Pension then the receipt of this money could affect them.

The premium on the grant of the lease is chargeable to CGT. Bear in mind you have an exemption of £11,100 or so, and do remember to include all your costs (where possible) as costs of disposal.