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.
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