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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Assets derived from other assets

TCGA92/SCH3/PARA5

Where the value of one asset is derived from another asset in the same ownership TCGA92/S43 provides for this fact to be recognised in the computation of any gain arising, see CG15230+.

Provision is made in TCGA92/SCH3/PARA5 for rebasing to apply on the disposal of an asset which was not itself held on 31 March 1982 but which is derived from an asset held on that date. For example, if a person

  • held a leasehold interest in property on 31 March 1982,
  • subsequently acquired the freehold reversion, and
  • sold the unencumbered freehold interest on or after 6 April 1988.

In computing the rebased gain on the disposal of the freehold interest the allowable expenditure under TCGA92/S38 (1)(a) is

  • the market value of the lease on 31 March 1982, plus
  • the cost price of the freehold interest.

The gain on the old rules is computed by reference to the original cost of the lease, see CG71400+.