Taxes Consolidation Act 1997 Schedule 14 paragraph 4

Payments during currency of lease treated as premium

Paragraph 4 treats certain payments made during the currency of a lease — sums in lieu of rent, sums for the surrender of a lease, and sums for the variation or waiver of lease terms — as additional premiums for capital gains tax purposes.

• Lump sums payable in place of rent, or as consideration for the surrender of a lease, are deemed to be additional premiums paid to the lessor for the relevant period.
• Lump sums payable for the variation or waiver of any of the terms of a lease are deemed to be additional premiums for the period during which the variation or waiver has effect.
• For payments in commutation of rent or for variation or waiver, the treatment depends on whether the lessor holds a freehold or long lease, or a short lease of 50 years or less.
• Surrender payments are treated as a separate disposal of the lessor's interest; non-arm's length transactions are brought in at market value; the rules apply equally for corporation tax.