Leases: grant of short lease out of freehold or long lease: allowable expenditure
As with the grant of any lease, the grant of a short lease out of a freehold or long lease is a part disposal. However, in applying the A/A+B part disposal formula in TCGA92/S42, a special rule must be observed.
- The A in the numerator (the top part of the fraction) is the amount of the premium not chargeable as property income.
- The A in the denominator (the bottom part of the fraction) is the full amount of the premium.
The amount chargeable to Schedule A is not deducted in arriving at the A factor in the denominator since the denominator must represent the value of the whole interest held by the landlord before the grant of the lease.