HMRC are consulting until 9 April 2024 on reforms that would address the difference in CGT treatment when a commercial or residential property is refinanced using alternative rather than conventional finance methods. Comments are also invited on the extent to which capital allowances issues arise for those using alternative financing.
The overall purpose of these changes is to ensure that, where certain conditions are met, the person obtaining the finance (P) is treated as having owned the interest in property throughout the period of the arrangements, and neither P nor the financial institution are treated as having made any disposal or acquisition.
The general proposal is that the qualifying refinancing arrangement must meet the following conditions in order to be exempt from a CGT charge:
a transfer of an interest in land from P to the financial institution;
a lease back of the interest from the financial institution to P;
a set period of time for the arrangement, for example 25 years;
an agreement that, at or before the end of the lease, the whole of the interest in land is returned to P by the financial institution, either in tranches over the life of the arrangement or following one final payment.
The legislation would need to set out what happens in the case of default and how agreements should be monitored in the event of default. There would also need to be robust avoidance rules.
HMRC are consulting until 9 April 2024 on reforms that would address the difference in CGT treatment when a commercial or residential property is refinanced using alternative rather than conventional finance methods. Comments are also invited on the extent to which capital allowances issues arise for those using alternative financing.
The overall purpose of these changes is to ensure that, where certain conditions are met, the person obtaining the finance (P) is treated as having owned the interest in property throughout the period of the arrangements, and neither P nor the financial institution are treated as having made any disposal or acquisition.
The general proposal is that the qualifying refinancing arrangement must meet the following conditions in order to be exempt from a CGT charge:
a transfer of an interest in land from P to the financial institution;
a lease back of the interest from the financial institution to P;
a set period of time for the arrangement, for example 25 years;
an agreement that, at or before the end of the lease, the whole of the interest in land is returned to P by the financial institution, either in tranches over the life of the arrangement or following one final payment.
The legislation would need to set out what happens in the case of default and how agreements should be monitored in the event of default. There would also need to be robust avoidance rules.
