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HMRC internal manual

Capital Gains Manual

Leases: granting of a lease: introduction

This section deals with the Capital Gains Tax consequences of the granting of a lease. As explained in CG70770, the granting of a lease is the part-disposal of the freehold or leasehold interest held by the grantor.

A chargeable gain or allowable loss will arise on the grant of a lease. There are three basic situations which are commonly met:

  • where a premium is paid;
  • where no premium is paid because the rent charged under the lease is a rack rent, see CG70751;
  • where the lease is granted otherwise than at arms length.

Each of these situations is covered in the guidance in this section.

The implications of a reverse premium are also considered.

The guidance in this section is sub-divided as follows:

  • premiums and reverse premiums, see CG70820 onwards
  • reverse premiums, see CG70830
  • interaction with the charge as property income, see CG70900P
  • long and short leases granted out of freeholds or long leases, see CG70950P
  • short leases granted out of short leases, see CG71000P
  • capital improvements by the tenant, see CG70840