A lease extension needs coordinated legal and tax advice. Edge helps leaseholders, freeholders and property companies understand the tax questions raised by their proposed terms, working alongside their solicitor where required.
A lease extension premium can be chargeable to SDLT, and the calculation may be more complex than a standard property purchase. The result depends on whether the extension creates a new lease or varies the existing one, whether it is residential or commercial, the amount of the premium and whether there is other consideration such as rent. We regularly review cases where the SDLT position or filing requirement has not been considered before completion.
For freeholders on the other side of the transaction, there’s a potential CGT liability on the premium received. If the freehold is held by a company, corporation tax applies instead. And in some cases, particularly on commercial lease extensions where the option to tax has been exercised, VAT is in play too.
Tell us whether you are the leaseholder or freeholder, the property location, the proposed premium and your expected completion date. We can then establish the scope of the tax review and the documents needed. The website cannot determine the treatment of your individual transaction.
This is specialist work that sits at the intersection of property law and property tax. We advise both leaseholders and freeholders on the tax consequences, making sure the full picture is understood before any deal is agreed. If you’re getting legal advice on a lease extension, you should be getting tax advice at the same time.
We work alongside your solicitor to review the SDLT position, relevant reliefs and any return requirements. Where filing support is needed, we agree responsibility and scope as part of the engagement. Contact us before completion so the tax questions can be addressed in time.
If you’re a freeholder granting a lease extension or selling the freehold, the premium you receive is potentially subject to CGT. Your solicitor negotiates the premium — but the tax treatment of what you receive depends on how it’s characterised and the base cost of the freehold interest. We advise before terms are agreed, not after.
Where leaseholders collectively purchase the freehold, the SDLT position depends on how the purchase is structured. The formation of a residents’ management company, the allocation of costs, and the ongoing tax treatment of the company all need consideration. We advise management companies and individual leaseholders through this process.
Commercial and mixed-use lease transactions can raise VAT questions that need to be considered alongside the legal terms. We review the relevant facts and any option-to-tax position as part of the agreed scope of advice.
A lease extension changes your asset for CGT purposes, and the premium paid forms part of the base cost on any future disposal. If you’ve acquired the freehold through a company, there are ongoing corporation tax and accounting implications. We make sure you understand the long-term position, not just the immediate transaction.
Tell us what you need help with. Our team will contact you to agree a suitable time to discuss your property accountancy or tax enquiry.
