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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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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.