CG71352 | Leases: commutation of rent provided for in terms of lease

TCGA92/Sch 8/Para 3 (2) - (5)

If

• a landlord receives a capital sum for the variation or waiver of one or more of the terms of the lease, or

• receives a capital sum for the commutation of the rent due under the lease and the lease provides for the possibility of such a payment:

1. The capital sum is deemed to be a premium, or additional premium, payable for the grant of the lease.

2. The ‘premium’ is deemed to relate to the period during which either the rent is commuted or the variation or waiver has effect.

3. If the landlord is the freeholder, or is a leaseholder and that lease has more than 50 years to run at the date of the payment of the capital sum, and the capital sum is payable on or after 6 April 1996, that capital sum is deemed to have been received on the date it was payable by the tenant, giving rise to a further part disposal on that date.

4. If the landlord is a leaseholder and that lease has 50 years or less to run at the date of the payment of the capital sum, that capital sum is treated as being paid for that part of the sub-lease to which it relates and the date of disposal is determined in the normal way, see CG14250P.

The way in which these rules apply is illustrated by the examples at CG71370.

Different rules applied to capital sums received before 6 April 1996; guidance on these rules has now been archived. Please contact the Capital Gains Technical Group if you require sight of this guidance.