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HMRC internal manual

# Short leases: disposal of lease wasting asset at 6/4/65

If a lease is disposed of which was owned by the person making the disposal at 6 April 1965 and it was a wasting asset at that time, you may have to consider the interaction of time-apportionment, see CG15570, with the wasting asset provisions.

Alternatively, you may need to consider the effect of an election under TCGA92/Sch 2/Para 17 for a valuation at 6 April 1965, see CG15525.

Neither of the above matters will need to be considered if:

• the lease is disposed of on or after 6 April 1988, and
• an election under TCGA92/S35 (5), see CG16760P, has been made.

The example which follows illustrates the effects of

1. time-apportionment;
2. an election for valuation at 6 April 1965

when the subject of the disposal is a lease which was a wasting asset at 6 April 1965.

## Example

Miss J acquired a 75 year lease on 6 April 1955 paying a premium of £5,000. On 6 April 2012, she assigned the lease in return for a premium of £30,000.The Valuation Office Agency reported that:

• the value of the lease at 6 April 1965 was £18,000;
• the value of the lease at 31 March 1982 was £20,000.

The alternative calculations are as follows:

## 1) Rebasing calculation

Value of lease at 31 March 1982: £20,000

### i) Exclusion from allowable expenditure, see CG71141:

= [ ( P(1) - P(3) ) / P(1) ] x £20,000

= [ (99.289 - 68.697) / 99.289 ] x £20,000

= £6,162

### ii) Allowable expenditure:

= £20,000 - £6,162 = £13,838

### iii) Computation of gain:

= £30,000 - £13,838

= £16,162

## 2) Historic cost calculation: time-apportionment

Original cost: £5,000

### i) Exclusion from allowable expenditure:

= [ ( P(1) - P(3) ) / P(1) ] x £5,000

= [ (100 - 68.697) / 100 ] x £5,000

= £1,565

### ii) Allowable expenditure:

= £5,000 - £1,565 = £3,435

### iii) Computation of gain:

= £30,000 - £3,435

= £26,565

### iv) Time-apportionment: part of gain arising after 6 April 1965:

= £26,565 x (Period of ownership after 6 April 1952 / Entire period of ownership)

= £26,565 x (47/57)

= £21,904

## 3) Historic cost calculation: election for valuation at 6 April 1965

Value at 6 April 1965: £12,000

### i) Exclusion from allowable expenditure:

= [ ( P(1) - P(3) ) / P(1) ] x £12,000

= [ (100 - 68.697) / 100 ] x £12,000

= £3,756

### ii) Allowable expenditure:

= £12,000 - £3,756 = £8,244

### iii) Computation of gain:

= £30,000 - £8,244

= £21,756