Freehold property to be split into 6 self contained units

chucky897 Registered Posts: 1 New contributor 🐸

I have a client who owns a freehold property personally and used it for a period as the business premises for the company he is the sole shareholder of. Upon the company leaving the premises the client decided to convert the building in to 6 separate self contained units, all the necessary planning was obtained and these units are now approaching completion.

Once completed the client is planning to remortgage the entire property based on the uplift in value. In order to maximize this and to ensure finance is easily obtained he wants this to be with each flat holding its own title.

A solicitor has advised that the client can only do this by issuing leases on each self contained unit via a third party with a limited company being the most straight forward option. So the client transfers the freehold to a limited company and the company issues an individual long lease on each self contained unit back to the client.

This is an area I'm not particularly familiar with and my research so far has still left matters unclear.

Am I right that the tax implications to the client are simply based on the value of the freehold which can effectively be minimal if leases don't stipulate any significant income to be generated from the freehold? And CGT due if value deemed significant to exceed annual exemption?

And obviously the limited company would have to attend to filing accounts and CT return if it generates any income from the freehold.

The only alternative to the above I have come across would be for the client to transfer the freehold to client and spouse jointly before creating individual leases back to client solely on each self contained unit but the mechanics of this seem less straight forward.

Any info will be appreciated.


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