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HMRC internal manual

Capital Gains Manual

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.