Short lease

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Short lease
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A short lease is a wasting asset (it has a limited life and loses value over its life). On this account the calculation of the gain arising on the disposure of a short lease ought to be accomplished by making a comparison disposal proceeds with the unexpired fragment of the lease's cost at the time of disposal [1].

Nevertheless, in contrast to other wasting assets, the cost of a short lease is believed to waste away on a straight line basis. In place of the cost of a short lease is deemed to waste away under a table of percentages which is given in Schedule 8 of TCGA 1992 and is replicated at the end of this section. The impact of this table is to write off the cost of a short lease gradually in the early years and more rapidly in the closing years [2].

The ratio of the cost of a short lease which is admitted in the Capital Gains Tax (CGT) calculation on its disposal is [3]:

  • % relating to number of year lease has left to run on disposal : % relating to original length of lease

Providing that the lease was initially a long lease but the ratepayer has owned it for several years so as to the lease now being assigned is a short lease, the denominator in the above fraction is taken as 100%, respondent to ’50 or more’ in the Schedule 8 table. Schedule 8 gives only percentages for entire numbers of years. If the length of a lease is not a whole amount of years, then the suitable percentage is computed from the table on a pro rata basis [4].

Grant of a short lease

The grant of a short lease, or in other words, sub-lease, out of a freehold (or a long head-lease) is for that matter considered as a part disposal for CGT purposes and on this account the part disposal rules apply once more. Nonetheless, a part of the premium obtained on the grant of a short lease is declarable to tax as property income and then, with the aim of avoiding double taxation, the disposal proceeds in the part-disposal calculation are minimised by the quantity of the premium which is declarable as property income [5].

Sale of a short lease

Note the succeedings points regarding the trade of a short list [6]:

  • Disposal of the overall asset (wasting asset)
  • Entire proceeds of trade are considered to be a capital receipt
  • Purchase cost is wasted in compliance with tables


  1. Melville A, (2008), s. 281
  2. Nightingale K, (2002/2003), s. 324
  3. Melville A, (2008), s. 281
  4. Melville A, (2008), s. 281
  5. Nightingale K, (2002/2003), s. 328
  6. Courtney P, Condell M, (2011), s.238


Author: Paulina Matysiewicz