16 of the 24 leaseholders of a block of flats have formed a Company (C) to purchase the freehold from the developer. Some of these participants are not able to fund their contribution fully, so 10 of the 16 are prepared to provide additional contributions to make up the shortfall. This must happen in many cases, not just my situation. I have been told by a solicitor that C can issue Loan Notes to reflect these additional contributions, which would be paid off with income from the C in the form of i) ground rent received, ii) partial contributors that increase their contribution to a full share and iii) from non-participating leaseholders who subsequently apply to join the Company. But one of the leaseholders is an accountant and says that this would be construed as tax evasion!. All we want to do is get control of the freehold and in our situation getting a little extra from 10 of the leaseholders to fund the shortfall seems perfectly reasonable. as does the use of Loan Notes to reflect these additional contributions. A full share is 5,100 - but because some are only contributing partially or not at all, the 10 additional contributors will put up c.7,600 each i.e. they will each be issued with Loan Notes of c.2,500. My question is, does this represent tax evasion? And if so, what model can we use to get the freehold purchase funded? Also, do the Loan Notes have to attract a rate of interest? As I see it, the interest paid on them will just lengthen the amount of time it takes for the Company to pay them off. Really stuck here as we seem to be going round in circles and the relationship with our solicitor is suffering, while time is steadily ticking away. Any help would be much appreciated.
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