Tax advice of the week: A handy leasehold loophole

Jun 01, 2012

Share with
friends:

Comments (0) Print this article

As a rule, using a company solely to hold investments “doesn’t make good tax sense”, but leasehold properties might be an exception, says Tax Tips & Advice. They are normally treated in a similar fashion to wasting assets, so you may not be able to claim a capital gains tax (CGT) loss if you sell one for less than you paid. However, this changes if you hold the property in a company.

Say John buys a 20-year lease on a holiday park unit for £80,000, puts it in a company and uses it with his family for 20 years until the leasehold expires and is worth nothing. The resulting loss of around £80,000 will count for CGT purposes, saving him up to £22,400 in CGT at current rates. That’s because a company’s shares “can be valued in different ways depending on what it does”. Shares in a company like John’s, which “only holds assets will be valued on how much these are worth”.

Shares in John’s company are worth £80,000 at the outset and nothing after 20 years. “But because shares aren’t wasting assets, the reduction in their value would create an allowable CGT loss, which John can use against other gains in the future”.

Comments (0)

Share with
friends:

Related articles

Leave a comment

This will be the name displayed with your comment.

This helps us verify comments are genuine. It will not be displayed anywhere on the site and is stored confidentially.

Please keep your comment within 1,000 characters and relevant to the main topic. We encourage healthy debate, but we don't allow insults or bad language. Anything off topic or unpleasant, we'll remove. Enjoy the conversation! Thank you.

captcha To prevent spam-related comments please enter the characters shown in the 'Captcha' box to the left.

By leaving a comment you accept our terms and conditions.


>