This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

CGT on giving a long head lease to charity

PeterBalham
Posts:9
Joined:Mon Sep 14, 2015 2:28 pm
CGT on giving a long head lease to charity

Postby PeterBalham » Mon Sep 14, 2015 2:36 pm

I am about to extend the lease on a number of properties I own where the freeholders are two local councils.

They have about 90 years left and so above the 80 year marriage value . I would extend the lease by 90 years. Some held directly and some though a Ltd Company.

This is why I have wondered why if I can use the fact I intend to increase my charitable giving to £25,000 to avoid some of the capital gains I would pay if I sell the flats I own,

I am using very rough numbers to make my question easier.

If you happened to have a share with a deeply inbeded capital gain it often make sense to give that share to charity rather than sell it and pay capital gains tax.

So if I had a share purchased for £5,000 now worth £20,000 and wish a charity to receive £25,000 as I understand it f you give the proceeds of the sale to a charity like Charities aid foundation they will gross up the £20,000 to £25,000 and you avoids CGT.

My question involves one of the properties I own directly.

In rough numbers I paid £50,000 and it is now worth £200,000.

Can I sell a head lease to my limited company and agree to pay the charity £25,000 of the proceeds.

I do not know the correct terms but in my mind after the transaction the company would own the “head lease” which I will assume has a market value of £50,000. Say from 30 years to the new 180 years after the extension/

I think will have crystallised 25% of the embedded capital gain £37,500 however as half the proceeds have gone to charity I would only have a CGT liability of half this amount £18,750 . Some of which I may defer with an EIS.

I may or may not then repeat the exercise .

Before I do any of the maths on this I wanted to know if my understanding is correct.

If I did go ahead I would trust myself to get all the numbers right and see if my existing accountant I use to produce my company accounts could handle it.

Return to “Capital Gains Tax, CGT”