BIM60110 - Measuring the profits (particular trades): land: trading transactions: acquisition and disposal of superior interest - computation of profit
S161 Taxation of Capital Gains Act 1992 (TCGA 1992)
In order to quantify the trading profit relating to the purchase and sale of the freehold by a tenant, you must establish the market value of the tenancy at the time the freehold was acquired.
»Ê¹ÚÌåÓýapp tenancy is then treated as if it were appropriated from fixed assets to trading stock thereby invoking S161 TCGA 1992: Bath and West Counties Property Trust Ltd v Thomas [1977] 52TC36.
This market value constitutes the 'consideration' on which the capital gain is computed.
It also constitutes a deduction in the computation of the trade profit.