Commentary

C2.1219 Restriction of sublessor's allowable losses by reference to relief for taxed income

Capital gains tax
Capital gains tax | Commentary

C2.1219 Restriction of sublessor's allowable losses by reference to relief for taxed income

Capital gains tax | Commentary

C2.1219 Restriction of sublessor's allowable losses by reference to relief for taxed income

A premium or a deemed premium in return for a lease of land (the head lease) for a term not exceeding 50 years gives rise to a tax on income in the hands of the recipient (unless he is exempt from tax)1.

The lessee may be entitled to relief in respect of the premium taxed as income (or which would be charged if the recipient was subject to tax); the relief is given by treating the amount as additional rent spread over the term of the head lease2.

Example 1

A has let land to B for a term of 21 years at a rent of £2,000 per annum plus a premium of £10,500, on which A would be charged as follows:

£
Premium10,500
Reduced

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