This relief is available where leaseholders of flats act
together to exercise a statutory right to purchase the freehold of
the block.
In these cases the freehold is acquired in a single
transaction by a nominee or appointee (which may be one or more
individuals or a company) acting on behalf of the leaseholders.
The relief acts to determine the rate of tax chargeable by
dividing the total consideration given for the freehold by the
number of flats leased by tenants who are participating in the
exercise of the right. The rate of tax appropriate to that
proportion of the consideration is then applied to the total
consideration for the transaction.
This brings the rate of tax more in line with that which
would have applied if the leaseholders had been able to purchase
their shares of the freehold separately.
Example
A nominee acting on behalf of the lessees of eight
out of ten flats in a block, one of whom leases two flats,
purchases the freehold of the block for £600,000. The rate of
tax applicable to this transaction without relief would be 4% as
the consideration exceeds £500,000.
As the statutory right is being exercised by the lessees of
eight flats, the £600,000 consideration is divided by eight
(£75,000). The rate of tax is therefore 0% and no tax is
payable.
The nominee or appointee must claim the relief in a land
transaction return using relief code 25.
This relief can be claimed only where the effective date of
the transaction is on orafter 22 April 2009. Before that date the relief
applies only to purchases undertaken by a statutory “right to
enfranchise” or RTE company. Section 4A Leasehold Reform,
Housing & Urban Development Act 1993, which provided for RTE
companies, was not brought into force.
