CG71190 - Short leases: disposal of lease wasting asset at 6/4/65
Source: gov.uk (2025-11-27)


If a lease is disposed of which was owned by the person making the disposal at 6 April 1965 and it was a wasting asset at that time, you may have to consider the interaction of time-apportionment, see CG15500 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15500), with the wasting asset provisions.

Alternatively, you may need to consider the effect of an election under TCGA92/Sch 2/Para 17 for a valuation at 6 April 1965, see CG15500 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15500).

Neither of the above matters will need to be considered if:
- the lease is disposed of on or after 6 April 1988, and
- an election under TCGA92/S35 (5), see CG16760P (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg16760p), has been made.
The example which follows illustrates the effects of
- time-apportionment;
- an election for valuation at 6 April 1965
when the subject of the disposal is a lease which was a wasting asset at 6 April 1965.

Example

Miss J acquired a 75 year lease on 6 April 1955 paying a premium of £5,000. On 6 April 2012, she assigned the lease in return for a premium of £30,000.The Valuation Office Agency reported that:
- the value of the lease at 6 April 1965 was £18,000;
- the value of the lease at 31 March 1982 was £20,000.
The alternative calculations are as follows:

1. Rebasing calculation

Value of lease at 31 March 1982: £20,000

Amount of expenditure to be excluded

As per CG71141 (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg71141):

[ (P(1) - P(3)) / P(1) ] x expenditure otherwise allowable under S38(1)(a)

P (1) is the percentage derived from the table in TCGA92/Sch 8/Para 1 (6) for the duration of the lease at the beginning of the period of ownership;

P (3) is the percentage derived from the table in TCGA92/Sch 8/Para 1 (6) for the duration of the lease at the date of disposal.

= [ (99.289 - xx-xxxx-xxxx ] x £20,000

= £6,162

Allowable expenditure

Value of lease at 31 March 1982 £20,000

Less amount of expenditure to be excluded £6,162

= £13,838

Chargeable gain

Premium received £30,000

Less allowable expenditure £13,838

= £16,162

2. Historic cost calculation: time-apportionment

Original cost: £5,000

i. Exclusion from allowable expenditure:

= [ ( P(1) - P(3) ) / P(1) ] x x expenditure otherwise allowable under S38(1)(a)

P (1) is the percentage derived from the table in TCGA92/Sch 8/Para 1 (6) for the duration of the lease at the beginning of the period of ownership;

P (3) is the percentage derived from the table in TCGA92/Sch 8/Para 1 (6) for the duration of the lease at the date of disposal.

= [ (100 - 68.697) / 100 ] x £5,000

= £1,565

Allowable expenditure

Original cost £5,000

Less amount of expenditure to be excluded £1,565

= £3,435

Chargeable gain

Premium received £30,000

Less allowable expenditure £3,435

= £26,565

Time-apportionment: part of gain arising after 6 April 1965:

=Chargable gain x (period of ownership after 6 April 1952 / Entire period of ownership)

= £26,565 x (47/57

= £21,904

3. Historic cost calculation: election for valuation at 6 April 1965

Value at 6 April 1965: £12,000

Amount of expenditure to be excluded

= [ ( P(1) - P(3) ) / P(1) ] x expenditure otherwise allowable under S38(1)(a)

P (1) is the percentage derived from the table in TCGA92/Sch 8/Para 1 (6) for the duration of the lease at the beginning of the period of ownership;

P (3) is the percentage derived from the table in TCGA92/Sch 8/Para 1 (6) for the duration of the lease at the date of disposal.

= [ (100 - 68.697) / 100 ] x £12,000

= £3,756

Allowable expenditure

Value at 6 April 1965 £5,000

Less amount of expenditure to be excluded £3,756

= £8,244

Chargeable gain

Premium received £30,000

Less allowable expenditure £8,244

= £21,756