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HMRC internal manual

Capital Gains Manual

Leases: part of premium chargeable as income: deemed premium: example

Mr K granted a 30 year lease of his holiday cottage to his brother. The rent payable under the lease was less than a full market rent. Mr K received a premium of £10,000. The Valuation Office Agency considered that the premium which would have been paid if the lease had been granted at arms length was £25,000.

The amount chargeable as income, see CG70900, is:

£10,000 - (£10,000 x 29) = £10,000 - £5,800 = £4,200

The consideration to be taken into account for CGT purposes is:

£5,800 + £15,000 = £20,800