How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4783
Type Your Tax Question Here...
bigduckontax is online now

A company buy a property at £1m and leases the property to

Customer Question

a company buy a property at £1m and leases the property to the wholly owned subisiary to £2m
Does the company need to pay capital gain tax
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

How long is the lease, please? Once I know this I will be in a position to assist.

Companies are not liable for Capital Gains Tax, all gains form part of the trading income for the Corporation Tax computation..

Customer: replied 2 years ago.

lease is for 99 years

Expert:  bigduckontax replied 2 years ago.
The whole premium would be classed as a capital gain as the lease is over 50 years. However, as I have explained companies are not exposed to Capital Gains Tax so the premium would form part of the other company's trading.
In taxation terms it is, in any event, the proverbial lemon as within company groups profits and losses of individual companies can be exchanged upwards, downwards and sideways to relieve Corporation Tax.
The company buying the property makes an item of capital expenditure which will reflect in the balance sheet [Debit Property, Credit Bank/cash] whilst the premium coming in is income which, in any event as I have explained, can be offset through group relief.
I do hope that I have assisted you with your inquiry.