Premium Leases
Premium leases are unique to the UK and are a very tax efficient way for a company to pay for executive housing.
The basic idea of a premium lease is that a company leases rather than rents a property from the owner. Therefore instead of becoming a landlord the owner becomes a lessor and instead of becoming a tenant, the company becomes a lessee, and the employee and family (who actually live in the property) become the licencee.
Confused? Don’t be! Basically the company pays a peppercorn rent of eg £1 and then a premium of the entire agreed rental price on day one. Usually the lease is long term (being no less than one year long) which means that on day one of the lease, the owner receives, for example, three years rent in one go. Sounds tempting really!!
A specialist company/solicitor needs to be on board to compile a premium lease as it has to be done effectively so that the company does not incur any penalties with the Inland Revenue. However, the general terms of the contract are very similar to a normal tenancy agreement with the usual responsibilities of both the lessor (landlord) and lessee (tenant) that you would expect.
Premium leases can provide benefits for the property owners, as well as the companies who want to lease the house, but it doesn’t suit everyone as they have to obtain mortgage consent and not all residential mortgages accept the situation.
As with the nature of the lease there are no break clauses for either the lessor or lessee during the term.
Stamp Duty Land Tax can come into the equation depending on the amount of premium paid and is payable by the company and not the Landlord. More information can be found at www.inlandrevenue.gov.uk/so.
Please contact us to see how we can help you find your next permium lease property.
