CG70770 - Leases: grant of a lease: part disposal

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 A/(A+B) 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 A/(A+B) formula, see CG70961.

• If the lease is granted out of a short lease, the A/(A+B) 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.