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HMRC internal manual

Capital Gains Manual

Short leases: disposal: allowable expenditure


A short lease of land is a wasting asset, but its value does not waste uniformly over its term. At first, the rate of decline in value is relatively slow but it becomes very rapid during the last few years of the term of the lease. Hence, the straight-line method of wasting expenditure contained in TCGA92/S46, see CG76772+, is not appropriate and is disapplied by TCGA92/SCH8/PARA1 (3).

Instead, the allowable expenditure is wasted in accordance with the table in TCGA92/SCH8/PARA1 and the formulae in paragraph 1(4) Schedule 8. Separate calculations are required for expenditure within TCGA92/S38 (1)(a), see CG71144, and for expenditure within Section 38(1)(b), see CG71147.

These rules apply if the lease was a short lease at the date of its disposal. They apply even if the lease was a long lease at the date of its acquisition.