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HMRC internal manual

Capital Gains Manual

Land: valuation: basis of valuation: land held subject to tenancy

In general, an interest in land which is held subject to a tenancy will be less valuable than one which is held with vacant possession. For that reason the owner of a piece of land will frequently take steps to secure vacant possession before sale.

It is sometimes argued that because the property was sold with vacant possession it should be valued in that state at 31 March 1982 even if it was in fact tenanted. It may be suggested that it is reasonable to value on a like-for-like basis.

This argument is incorrect and should not be accepted. The purpose of rebasing and indexation is to eliminate any gain which is attributable to inflation. It does not protect a gain which is attributable to securing vacant possession. The land should be valued subject to the tenancy, see Henderson v Executors of David Karmel (deceased) 58TC201.