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HMRC internal manual

Capital Gains Manual

Leases: grant of lease out of short lease: example

Mrs S paid a premium of £20,000 to acquire a 30 year lease over a property. Five years later she granted a sub-lease for 10 years over the whole property. The rent payable under the sub-lease was the same as that payable under the original lease.

The expenditure which is allowable on the grant of the sub-lease is the amount which will waste away over its 10 year duration. When the sub-lease was granted, Mrs S’s original lease had 25 years left to run. When the sub- lease ends, her original lease will have 15 years left to run.

The factors which are required from the table in TCGA92/SCH9/PARA1, see CG71141, are:

Factor for 30 years (the term of Mrs S’s lease when acquired): 87.330

Factor for 25 years ( the remaining term when the sub-lease was granted); 81.100

Factor for 15 years (the remaining term when the sub-lease expires): 61.617

The proportion of the expenditure which will waste away during the term of the sub-lease is:


£20,000 x 81.100 - 61.617 = £4,462