Beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Capital Gains Manual

Leases: grant of lease out of short lease: computation of gain


Where a short lease is granted out of a short lease, a part of the premium received will be chargeable as property income, see CG70900. This amount must be excluded when arriving at the gain accruing on the grant of the sub-lease.

The way in which this is done is by initially using the full amount of the premium as the consideration for CGT purposes. After calculating the indexed gain, the amount chargeable under Schedule A is deducted to arrive at the chargeable gain.

However, this deduction cannot transform an indexed gain into an allowable loss, nor can it increase the amount of an indexed loss - TCGA92/SCH8/PARA5 (2).

The method of computing the gain in these circumstances is illustrated by the following two examples.

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.