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HMRC internal manual

Capital Gains Manual

Land: leases

A leasehold interest will entitle its holder to exclusive possession of the property for a particular term.

A freeholder may grant a lease of any duration. A leaseholder may, subject to the landlord’s consent, grant a sub-lease for any period less than the remaining term of the lease.

However if the holder of a lease is to have a legal interest in the land, the lease must be granted by deed. If it is not, the lessee will have, at best, only a beneficial interest in the land (although this will be the relevant interest for CGT purposes, see CG11730).

An agreement for the grant of a lease results in the lessee acquiring a beneficial interest in the land if:

  • the lessee has given valuable consideration for the agreement; and
  • the agreement is either in writing, or is supported by acts of part-performance, for example if the lessee occupies the property with the consent of the lessor.

For CGT purposes, there are special rules in TCGA92/SCH8 for dealing with leases, see CG70700+. For those purposes, the term `leases’ includes any licence or agreement for a lease.