Leases: grant of lease out of short lease: introduction
Where a short lease, that is a lease for a term of not more than 50 years, is granted out of a short lease, a number of special rules apply.
- The part disposal formula in TCGA92/S42 does not apply, see CG71001.
- The full amount of any premium is taken as the consideration for CGT purposes, even though part of that premium will be chargeable under Schedule A. A deduction for the amount chargeable under Schedule A is then made after calculating the indexed gain, see CG71003-CG71004. However, this deduction cannot turn an indexed gain into a loss, nor can it increase the amount of an indexed loss.
- The allowable expenditure is reduced if the rent payable under the sub-lease is greater than the rent payable under the original lease, see CG71007.
- Where only part of the land is sub-let, the allowable expenditure is reduced, see CG71012.
- In certain circumstances, the capital loss arising on the grant of a sub-lease is reduced, see CG71016.