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HMRC internal manual

Capital Gains Manual

Leases: sale and leaseback

If a freehold or leasehold interest in land is disposed of, on terms which include the provision that the purchaser will grant a lease of the whole or part of the land in question to the vendor, that should be treated as a part-disposal by the vendor. It should not be treated as two separate disposals, one by the vendor and one by the purchaser, see Sargaison v Roberts 45TC612.

The value of the interest which is retained by the vendor is the market value of the lease granted by the purchaser.

It is possible that a charge arises under ITTOIA05/S285 or CTA09/S225, see PIM1226. Note a charge does not arise if the lease is granted and begins to run within one month of the sale.

The way in which gains are computed in such cases is illustrated by the examples at CG70775 and CG70776.