The grant of a lease for a premium constitutes a part disposal of the landlord’s interest in the property, with the premium taxed as a capital receipt. This is the case, irrespective of the length of the lease granted to the tenant. However, the grant of a long lease is a pure CGT event with no income tax consequences.
Because this is a part disposal, only part of the landlord’s allowable costs can be deducted. Where the landlord owns the freehold or a long leasehold interest, these costs are adjusted under TCGA 1992, s. 42 by multiplying them by the following factor: