»Ê¹ÚÌåÓýapp

ITTOIA05/S287 and CTA09/S227

Where a premium is paid for a short lease, that is a lease of not more than 50 years duration, part of that premium will be chargeable as property income, see PIM1200. »Ê¹ÚÌåÓýapp amount chargeable as income is arrived at by the following formula:
Ìý

P xÌý[ (50Ìý-ÌýY) / 50 ]

P is the amount of the premium;

Y is the number of complete years (other than the first) in the term of the lease.

Example

A 25 year lease is granted for a premium of £40,000. »Ê¹ÚÌåÓýapp amount chargeableÌýas incomeÌýis:

£40,000 xÌý[ (50Ìý-Ìý24) / 50 ] = £40,000 x 0.52Ìý= £20,800

Effect on capital gains computation

TCGA92/Sch 8/Para 5 & TCGA92/Sch 8/Para 6

»Ê¹ÚÌåÓýapp amount of a premium paid for the grant of a short lease which is chargeable as income is excluded from the consideration taken into account for capital gainsÌýpurposes. »Ê¹ÚÌåÓýapp precise way in which this is done depends on whether:

• »Ê¹ÚÌåÓýapp lease was granted out of a freehold or long lease, see CG70950P, or
• »Ê¹ÚÌåÓýapp lease was granted out of a short lease, see CG71000P.

»Ê¹ÚÌåÓýapp precise rules are contained in TCGA92/Sch 8/Para 5 and TCGA92/Sch 8/Para 6.

TCGA92/S37, the general provision regarding amounts chargeable to Income Tax, see CG14300, is specifically over-ridden by TCGA92/Sch 8/Para 5 (6).