The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
A lease is the right to use an asset. Where the asset in question is land or buildings, the lease is the right to occupy the land or buildings for a specified period of time, usually in return for a specified rent.
Contrast this to a freehold, which is the outright ownership of the property and the land upon which it is built. Freehold and leasehold are separate assets and, as such, a lease can be bought and sold in its own right as well as granted (ie created from a freehold).
This guidance note considers the capital gains tax position on:
assignment of a long lease (over 50 years to run)
assignment of a short lease (50 years or less to run)
grant of a long lease
grant of a short lease
Assignment is the legal term for sale of a lease.
Disposals of leases are reportable on the Capital Gains Summary supplementary pages to the Tax Return. Computations of the chargeable gain or allowable loss must be submitted with the Tax Return.
When calculating the capital gain or loss, you should consider the HMRC ‘Capital gains tax for land and buildings’ toolkit. The aim of the toolkit is to prevent common errors made by practitioners in the capital gains tax reporting of disposals of land and buildings.
The capital gain or loss on the assignment of a long lease is found using the standard capital gains tax proforma. See the Basic calculation principles of capital gains tax guidance note for discussion of the allowable deductions and obtaining a valuation for the market value as at 31 March 1982 (MV82), if necessary.
A lease is worth less as the number of years which the tenant has the right to occupy the land /
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