Thanks Keith - but I think you have misunderstood. The transfer of the freehold into a separate company is purely to get around the legal difficulty of having the leases owned by the freeholder - there will be no value in this transaction (say 999 year lease @£1/year). I am concerned about the possibility of tax on the notional profit arising once the development is complete. Bearing in mind that he did not originally buy the property with a view to development - but nevertheless he has developed it - we do not have the normal developer problem of the asset being transferred from development "stock" to long term fixed asset.
As I have said - there will be no value in the transfer to the limited company. I am not worried about this transaction in its own right (unless you are saying that I should be?). It is the unrealised profit that he is sitting on personally that concerns me.
But the point is there is no value in that transaction - a freehold with just the benefit of a 999 year lease yielding £1/year is worth nothing - the value is all in the lease - and he is retaining the leases personally.
So what would he be taxed on then. If say each apartment is worth £1m and his total cost is £3m. The value of the freehold in the limited company might be say £100 (and that is all he is selling) - what will he be taxed on?
But the current market value of what? - are you saying that he will be taxed on the £4m unrealised gain (on the leases that he is retaining as a personal asset) or is this just on the £100 realised gain?
But surely that is the whole point - if the gain is subject to CGT AND he gets roll over relief then he is not going to be called upon to pay any tax until he sells the properties. And this is exactly the issue I have been attempting to find the answer to - will he have to pay tax now on the unrealised gain?