Where a short sublease is granted for a premium out of a short lease, there is a part disposal of the of the larger lease out of which the sublease is granted. The capital gain is calculated by applying the adjustments below. For this purpose, a 'short lease' is one with a remaining term of 50 years or less and is treated as a wasting asset.
Deduction of premium taxed as income
Where a premium is required to be paid under a short lease of land, the person who is due to receive the premium is treated as entering into a property business transaction – a UK property business if the land to which the lease relates is in the UK or an overseas property business otherwise – and an amount of deemed income is treated as a receipt of the business for the tax year or accounting period in which the lease is granted1. The deemed income is equal to the amount of the premium reduced by one-fiftieth
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