SCHEDULES
C1SCHEDULE 8Leases
Leases of land as wasting assets: curved line restriction of allowable expenditure
1
1
A lease of land shall not be a wasting asset until the time when its duration does not exceed 50 years.
2
If at the beginning of the period of ownership of a lease of land it is subject to a sublease not at a rackrent and the value of the lease at the end of the duration of the sublease, estimated as at the beginning of the period of ownership, exceeds the expenditure allowable under section 38(1)(a) in computing the gain accruing on a disposal of the lease, the lease shall not be a wasting asset until the end of the duration of the sublease.
3
In the case of a wasting asset which is a lease of land the rate at which expenditure is assumed to be written off shall, instead of being a uniform rate as provided by section 46, be a rate fixed in accordance with the Table below.
4
Accordingly, for the purposes of the computation of the gain accruing on a disposal of a lease, and given that —
a
the percentage derived from the Table for the duration of the lease at the beginning of the period of ownership is P(1),
b
the percentage so derived for the duration of the lease at the time when any item of expenditure attributable to the lease under section 38(1)(b) is first reflected in the nature of the lease is P(2), and
c
the percentage so derived for the duration of the lease at the time of the disposal is P(3), then—
i
there shall be excluded from the expenditure attributable to the lease under section 38(1)(a) a fraction equal to —
and
ii
there shall be excluded from any item of expenditure attributable to the lease under section 38(1)(b) a fraction equal to—
5
This paragraph applies notwithstanding that the period of ownership of the lease is a period exceeding 50 years and, accordingly, no expenditure shall be written off under this paragraph in respect of any period earlier than the time when the lease becomes a wasting asset.
6
Section 47 shall apply in relation to this paragraph as it applies in relation to section 46.
Years | Percentage |
50 (or more) | 100 |
49 | 99.657 |
48 | 99.289 |
47 | 98.902 |
46 | 98.490 |
45 | 98.059 |
44 | 97.595 |
43 | 97.107 |
42 | 96.593 |
41 | 96.041 |
40 | 95.457 |
39 | 94.842 |
38 | 94.189 |
37 | 93.497 |
36 | 92.761 |
35 | 91.981 |
34 | 91.156 |
33 | 90.280 |
32 | 89.354 |
31 | 88.371 |
30 | 87.330 |
29 | 86.226 |
28 | 85.053 |
27 | 83.816 |
26 | 82.496 |
25 | 81.100 |
24 | 79.622 |
23 | 78.055 |
22 | 76.399 |
21 | 74.635 |
20 | 72.770 |
19 | 70.791 |
18 | 68.697 |
17 | 66.470 |
16 | 64.116 |
15 | 61.617 |
14 | 58.971 |
13 | 56.167 |
12 | 53.191 |
11 | 50.038 |
10 | 46.695 |
9 | 43.154 |
8 | 39.399 |
7 | 35.414 |
6 | 31.195 |
5 | 26.722 |
4 | 21.983 |
3 | 16.959 |
2 | 11.629 |
1 | 5.983 |
0 | 0 |
If the duration of the lease is not an exact number of years the percentage to be derived from the Table above shall be the percentage for the whole number of years plus one-twelfth of the difference between that and the percentage for the next higher number of years for each odd month counting an odd 14 days or more as one month.
Subleases out of short leases
4
1
In the computation of the gain accruing on the part disposal of a lease which is a wasting asset by way of the grant of a sublease for a premium the expenditure attributable to the lease under paragraphs (a) and (b) of section 38(1) shall be apportioned in accordance with this paragraph, and section 42 shall not apply.
2
Out of each item of the expenditure attributable to the lease under paragraphs (a) and (b) of section 38(1) there shall be apportioned to what is disposed of —
a
if the amount of the premium is not less than what would be obtainable by way of premium for the said sublease if the rent payable under that sublease were the same as the rent payable under the lease, the fraction which, under paragraph 1(3) of this Schedule, is to be written off over the period which is the duration of the sublease, and
b
if the amount of the premium is less than the said amount so obtainable, the said fraction multiplied by a fraction equal to the amount of the said premium divided by the said amount so obtainable.
3
If the sublease is a sublease of part only of the land comprised in the lease this paragraph shall apply only in relation to a proportion of the expenditure attributable to the lease under paragraphs (a) and (b) of section 38(1) which is the same as the proportion which the value of the land comprised in the sublease bears to the value of that and the other land comprised in the lease; and the remainder of that expenditure shall be apportioned to what remains undisposed of.
Duration of leases
8
1
In ascertaining for the purposes of this Act the duration of a lease of land the following provisions shall have effect.
2
Where the terms of the lease include provision for the determination of the lease by notice given by the landlord, the lease shall not be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice given by the landlord.
3
Where any of the terms of the lease (whether relating to forfeiture or to any other matter) or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiration of the term of the lease, the lease shall not be treated as having been granted for a term longer than one ending on that date.
4
Sub-paragraph (3) applies in particular where the lease provides for the rent to go up after a given date, or for the tenants obligations to become in any other respect more onerous after a given date, but includes provision for the determination of the lease on that date, by notice given by the tenant, and those provisions render it unlikely that the lease will continue beyond that date.
5
Where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant this paragraph shall apply as if the term of the lease extended for as long as it could be extended by the tenant, but subject to any right of the landlord by notice to determine the lease.
6
It is hereby declared that the question what is the duration of a lease is to be decided, in relation to the grant or any disposal of the lease, by reference to the facts which were known or ascertainable at the time when the lease was acquired or created.
Leases of property other than land
9
1
Paragraphs 2, 3, 4 and 8 of this Schedule shall apply in relation to leases of property other than land as they apply to leases of land, but subject to any necessary modifications.
2
Where by reference to any capital sum within the meaning of F5section 681DM of ITA 2007 (leases of assets other than land) any person has been charged to income tax on any amount, that amount out of the capital sum shall be deducted from any gain accruing on the disposal for which that capital sum is consideration, as computed in accordance with the provisions of this Act apart from this sub-paragraph, but not so as to convert the gain into a loss, or increase any loss.
3
In the case of a lease of a wasting asset which is movable property the lease shall be assumed to terminate not later than the end of the life of the wasting asset.
Interpretation
10
1
In this Act, unless the context otherwise requires “lease” —
a
in relation to land, includes an underlease, sublease or any tenancy or licence, and any agreement for a lease, underlease, sublease or tenancy or licence and, in the case of land outside the United Kingdom, any interest corresponding to a lease as so defined,
b
in relation to any description of property other than land, means any kind of agreement or arrangement under which payments are made for the use of, or otherwise in respect of, property,
and “lessor”, “lessee” and “rent” shall be construed accordingly.
2
In this Schedule “premium” includes any like sum, whether payable to the intermediate or a superior landlord, and for the purposes of this Schedule any sum (other than rent) paid on or in connection with the granting of a tenancy shall be presumed to have been paid by way of premium except in so far as F15other sufficient consideration for the payment can be shown to have been given.
3
In the application of this Schedule to Scotland “premium” includes in particular a grassum payable to any landlord or intermediate landlord on the creation of a sublease.
Sch. 8 modified (with effect in accordance with s. 39(4)(a)(5) of the amending Act) by Finance Act 1995 (c. 4), s. 39(3), Sch. 6 para. 37