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HMRC internal manual

Capital Gains Manual

Leases: consideration for surrender of: release from certain obligations

Many leases require the tenant to make good any dilapidations before the tenancy comes to an end. If a lease is surrendered on terms which include the release of the tenant from a liability to make good any dilapidations, or which include the release of the tenant from any other onerous liability, the value attributable to that release is consideration for the purposes of capital gains.

If you encounter a case of this kind, you should ask the Valuation Office Agency for a valuation of the release from the obligations. No special form is provided, but a form CG20 (New) should be used along with a covering memo explaining why a valuation is required. A copy of the lease should be sent to the Valuation Office Agency with the valuation request.  Further guidance on referrals to Valuation Office Agency is available at CG74000C