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CG70770 | Leases: grant of a lease: part disposal

From HM Revenue & Customs · Capital Gains Manual

The grant of a lease is a part disposal for CG purposes. This is because the lessor has retained a part of his original interest in the land in question.

  • If the lease is granted out of a freehold or long lease, the / formula in TCGA92/S42, see CG12730P, applies. However, if the lease which is granted is a short lease, that is a lease with a term of less than 50 years, a special rule applies regarding the / formula, see CG70960.

  • If the lease is granted out of a short lease, the / formula does not apply. TCGA92/Sch 8/Para 4 contains special rules to deal with such cases, see CG71000P.

There will be a part disposal of the lessor's interest in the land even if no premium is paid by the lessee. In these circumstances, a capital loss may arise, see CG70822.