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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Land: part-disposals: value shifting: example

TCGA92/S28 (4)

On 30 June 1987, Mr R bought the freehold of a vacant property for £60,000. On 31 August 1990, he gave the freehold interest in the property to his son subject to a 99-year lease in favour of Mr R. The rent payable under that lease was £1 per year.

The Valuation Office Agency advised that, as at 31 August 1990, the value of the son’s interest in the property should be regarded as nil.

On 31 July 1992, Mr R agreed with his son that he would pay a rent of £10,000 a year from that time onwards. That action amounted to a transfer of value from Mr R to his son and TCGA92/S29 (4) applied.

The Valuation Office Agency provided the following values

Value of lease immediately prior to 31 July 1992: £100,000;

Value of lease immediately after transfer of value: £30,000;

Value transferred: £70,000.

The gain arising to Mr R is calculated as follows.


  Disposal proceeds (value transferred)      £70,000
Less Cost £60,000 x £70,000  
 £100,000 (£42,000)        
    Unindexed gain      £28,000
  Less Indexation £42,000 x 0.362   (£15,204)
    Chargeable gain       £12,796