CG70777 | Leases: sale with right to reconveyance

TCGA92/Sch 8/Para 5 (3)

If land is sold with a right for the vendor to reacquire it at some time in the future, part of the sale proceeds may be chargeable as income under ITTOIA05/S284 or CTA09/S224, see PIM1224. The amount charged to Income Tax is to be excluded from the CGT computation. The way in which this is done is:

• if the disposal was of a short lease, that is a lease with less than 50 years to run, the amount charged to Income Tax is deducted after the gain has been calculated using the gross sale proceeds, see CG71001 which illustrates how this is done is a different context;

• if the disposal was of a freehold or long lease, the amount charged to Income Tax is deducted from the sale proceeds to arrive at the consideration used in calculating the gain, see CG70960 which explains how this is done in a different context.