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HMRC internal manual

Capital Gains Manual

Leases: merger: valuation at 6/4/65 or 31/3/82

Valuations at 6 April 1965 (for the purposes of TCGA92/SCH2) or 31 March 1982 (for indexation or rebasing purposes) may be required in cases involving the merger of leases.

Where this is the case, there is a deemed disposal and reacquisition of the asset at the valuation date. The asset to be valued is the asset which existed on that date. So if the superior interest was acquired after the valuation date, the asset to be valued is the earlier lease. In these circumstances the allowable expenditure will be

  • the market value of the leasehold interest on the valuation date, `wasted’ to the date of acquisition of the superior interest (if appropriate), plus
  • the cost of the superior interest.