Chris Holmes (BDO) and Martin Codd (Penningtons Manches Cooper) consider a more cost-effective route for landlords when considering an extension of a residential lease with their tenant.
The taxation of lease extensions is an area that is often misunderstood and as we will demonstrate below can result in substantial unanticipated tax liabilities for the landlord. Leases can be extended through a number of legal processes although for residential leases most lawyers will use a ‘surrender and regrant ’ i.e. the old lease is surrendered to the landlord as consideration (with payment of a premium) for the issue of a new longer lease.
However if the lease was instead extended by granting a ‘lease of the reversion’ ‘concurrent lease’ or ‘overriding lease’ the taxation of the transaction changes completely and no surprise tax liabilities should arise.
Although property lawyers are familiar with the concept of...
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Chris Holmes (BDO) and Martin Codd (Penningtons Manches Cooper) consider a more cost-effective route for landlords when considering an extension of a residential lease with their tenant.
The taxation of lease extensions is an area that is often misunderstood and as we will demonstrate below can result in substantial unanticipated tax liabilities for the landlord. Leases can be extended through a number of legal processes although for residential leases most lawyers will use a ‘surrender and regrant ’ i.e. the old lease is surrendered to the landlord as consideration (with payment of a premium) for the issue of a new longer lease.
However if the lease was instead extended by granting a ‘lease of the reversion’ ‘concurrent lease’ or ‘overriding lease’ the taxation of the transaction changes completely and no surprise tax liabilities should arise.
Although property lawyers are familiar with the concept of...
If you or your firm subscribes to Taxjournal.com, please click the login box below:
If you do not subscribe but are a registered user, please enter your details in the following boxes:
