Taxes Consolidation Act 1997 Schedule 14 paragraph 6

Exclusion of premiums taxed under Case V of Schedule D

Paragraph 6 of Schedule 14 prevents double taxation by ensuring that the portion of a lease premium already charged to income tax under sections 98 or 100 is not also charged to capital gains tax.

• Where a premium on a short lease is partly taxed as income under section 98, the income-taxed amount is excluded from the CGT computation — but if the lease is granted out of a freehold or long lease (a part-disposal), the exclusion operates through the part-disposal fraction rather than as a straight deduction
• Where a short lease is granted out of another short lease, the full premium is used in the CGT computation first, and the income-taxed amount is then deducted from the resulting gain — but the deduction cannot create or increase a loss
• The same approach applies to deemed premiums charged to income tax under section 100 (sale of land with a right of reconveyance), with the method of relief depending on whether the disposal is out of a freehold/long lease or out of a short lease
• The general rule in section 551 that excludes income-taxed receipts from CGT computations does not apply to amounts charged under section 75 and Chapter 8 of Part 4 (land and buildings), so that the full premium can enter the CGT computation before the income-taxed portion is removed