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Where Taxpayers and Advisers Meet

Gifting beneficial interest in a commercial lease

Joined:Fri Nov 27, 2015 1:40 pm
Gifting beneficial interest in a commercial lease

Postby samuelp » Mon Oct 29, 2018 9:21 am

My wife and I have a Commercial lease for a retail properly with residential uppers which was acquired around 30 years ago when I purchased a business as a going concern. There is 7 years remaining on the lease. I have granted the lease to a third-party for which I get an Income of £30k per year which is split with my wife.

We would like to gift the beneficial interest in the lease to our 3 grandchildren (all minors) through a Bare Trust. The aim is to reduce our taxable income and for the grandchildren to use the income to pay their private school fees. I assume the grandchildren can use their tax free allowance and hence pay no tax on the income.

What I would like to understand is:

1. How do I gift the beneficial interest in the lease to the Bare Trust - Can I simply use a Declaration of Trust?
2. Is any CGT or SDLT applicable to the gift or any other tax?

Joined:Sun Apr 30, 2017 5:45 pm

Re: Gifting beneficial interest in a commercial lease

Postby SDLT Geek » Sat Nov 03, 2018 8:20 pm

I did wonder if the acquisition by your grandchildren in the beneficial interest in a leasehold property including dwellings would stop them being first time buyers for the purposes of the SDLT relief. But they should be alright as the lease has less than 21 years to run on the date they acquire it.

Other thoughts:

1. Declaration of trust might do it if allowed by the lease and any mortgage. You should check that there is no need to offer it to the residential tenants first.
2. Generally there is no SDLT on a gift. That can be different where there is a mortgage.

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