10 year anniversary charge - deduction of membership fee

Trusts Discussion
1

We are preparing the necessary forms to report the 10 year anniversary charge. There are two properties, both partially owned by the trust.

One of the properties is a flat within a retirement village. When the property is sold, under the lease agreement, there a membership fee equivalent to 20% of the sale proceeds payable to the company.

My question is, can we either deduct the 20% fee as a liability, or can we simply reduce the value of the property by 20%? Or in fact can we not take into account the fee at all? If we can deduct the 20% then there will be no tax payable.

Thanks

2

Hello,

I’d suggest Alexander v IRC would apply here and the trust value should be reduced to reflect the liability.

This is a common question on the same basis when establishing a value for probate.

IHTM28392 - Liabilities: law relating to debts: deducting liabilities that are charged or fixed to specific property - HMRC internal manual - GOV.UK).

Richard C. Bishop