Taxation of Chargeable Gains Act 1992 (c. 12)

(The document as of February, 2008)

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(a) so much of the gains qualifying for relief as do not exceed the appropriate percentage of £150,000; and

(b) one half of so much of those gains as exceed the appropriate percentage of £150,000 but do not exceed that percentage of £600,000;

and for the purposes of this sub-paragraph "the appropriate percentage" is a percentage determined according to the length of the qualifying period which is appropriate to the disposal on a scale rising arithmetically from 10 per cent. where that period is precisely one year to 100 per cent. where it is 10 years.

(2) In sub-paragraph (1) above "the gains qualifying for relief" means, in relation to any qualifying disposal, so much of the gains accruing on that disposal (aggregated under paragraph 6, 7(1)(a) or 8(1)(a) above) as would, by virtue of this Schedule, not be chargeable gains if--

(a) sub-paragraph (1) above had specified as the amount available for relief a fixed sum in excess of those aggregate gains; and

(b) paragraphs 14 to 16 below were disregarded.

(3) The amount available for relief by virtue of section 164 on a trustees' disposal shall be determined, subject to sub-paragraph (4) below, in accordance with sub-paragraph (1) above on the assumption that the trustees' disposal is a qualifying disposal by the qualifying beneficiary.

(4) If, on the same day, there is both a trustees' disposal and a material disposal of business assets by the qualifying beneficiary, the amount available for relief shall be applied to the beneficiary's disposal in priority to the trustees' disposal.

Aggregation of earlier business periods

14 (1) If, apart from this paragraph, the qualifying period appropriate to a qualifying disposal ("the original qualifying period") would be less than 10 years but throughout some period ("the earlier business period") which--

(a) ends not earlier than 2 years before the beginning of the original qualifying period, and

(b) falls, in whole or in part, within the period of 10 years ending at the end of the original qualifying period,

the individual making the disposal or, as the case may be, the relevant beneficiary was concerned in the carrying on of another business ("the previous business") then, for the purpose of determining the amount available for relief on the qualifying disposal, the length of the qualifying period appropriate to that disposal shall be redetermined on the assumptions and subject to the provisions set out below.

(2) For the purposes of the redetermination referred to in sub-paragraph (1) above, it shall be assumed that the previous business is the same business as the business at retirement and, in the first instance, any time between the end of the earlier business period and the beginning of the qualifying period shall be disregarded (so that those 2 periods shall be assumed to be one continuous period).

(3) The reference in sub-paragraph (1) above to a person being concerned in the carrying on of a business is a reference to his being so concerned personally or as a member of a partnership or, if the business was owned by a company, then as a full-time working director of that company or, as the case may be, of any member of the group or commercial association of which it is a member; and the reference in sub-paragraph (2) above to the business at retirement is a reference to that business which, in relation to the qualifying disposal, is referred to--

(a) in subsection (3), subsection (4) or subsection (5) of section 163 where the qualifying disposal is a material disposal of business assets;

(b) in subsection (5) of section 164 where that disposal is a trustees' disposal; and

(4) Any extended qualifying period resulting from the operation of subparagraph (2) above shall not begin earlier than the beginning of the period of 10 years referred to in sub-paragraph (1)(b) above.

(5) If the earlier business period ended before the beginning of the original qualifying period, any extended qualifying period which would otherwise result from the operation of the preceding provisions of this paragraph shall be reduced by deducting therefrom a period equal to that between the ending of the earlier business period and the beginning of the original qualifying period.

(6) Where there is more than one business which qualifies as the previous business and, accordingly, more than one period which qualifies as the earlier business period, this paragraph shall apply first in relation to that one of those businesses in which the individual in question was last concerned and shall then again apply (as if any extended qualifying period resulting from the first application were the original qualifying period) in relation to the next of those businesses and so on.

Relief given on earlier disposal

15 (1) In any case where--

(a) an individual makes a qualifying disposal or is the qualifying beneficiary in relation to a trustees' disposal, and

(b) relief has been (or falls to be) given under this Schedule in respect of an earlier disposal which was either a qualifying disposal made by the individual or a trustees' disposal in respect of which he was the qualifying beneficiary,

the amount which, apart from this paragraph, would be the amount available for relief on the disposal mentioned in paragraph (a) above shall not exceed the limit in sub-paragraph (3) below.

(2) In the following provisions of this paragraph--

(a) the disposal falling within sub-paragraph (1)(a) above is referred to as "the later disposal"; and

(b) the disposal falling within sub-paragraph (1)(b) above or, if there is more than one such disposal, each of them is referred to as "the earlier disposal".

(3) The limit referred to in sub-paragraph (1) above is the difference between--

(a) the amount which would be available for relief on the later disposal--

(i) if the gains qualifying for relief on that disposal were increased by the amount of the underlying gains relieved on the earlier disposal (or the aggregate amount of the underlying gains relieved on all the earlier disposals, as the case may be); and

(ii) if the qualifying period appropriate to the later disposal (as redetermined where appropriate under paragraph 14 above) were extended by the addition of a period equal to so much (if any) of the qualifying period appropriate to the earlier disposal (or, as the case may be, to each of the earlier disposals) as does not already fall within the qualifying period appropriate to the later disposal; and

(b) the amount of relief given under this Schedule on the earlier disposal or, as the case may be, the aggregate of the relief so given on all the earlier disposals.

(4) Where there is only one earlier disposal, or where there are 2 or more such disposals but none of them took place on or after 6th April 1988, then, for the purposes of sub-paragraph (3)(a)(i) above--

(a) if the earlier disposal took place on or after 6th April 1988, the amount of the underlying gains relieved on that disposal is the aggregate of--

(i) so much of the gains qualifying for relief on that disposal as were, by virtue of paragraph 13(1)(a) above, not chargeable gains; and

(ii) twice the amount of so much of those gains as were, by virtue of paragraph 13(1)(b) above, not chargeable gains; and

(b) if the earlier disposal took place before 6th April 1988, the amount of the underlying gains relieved on that disposal (or on each such disposal) is so much of the gains qualifying for relief on that disposal as were, by virtue of paragraph 13 of Schedule 20 to the [1985 c. 54.] Finance Act 1985, not chargeable gains.

(5) Where there are 2 or more earlier disposals and at least one of them took place on or after 6th April 1988, then, for the purposes of sub-paragraph (3)(a)(i) above, the aggregate amount of the underlying gains relieved on all those disposals shall be determined as follows--

(a) it shall be assumed for the purposes of paragraph (b) below--

(i) that the amount which resulted from the calculation under sub-paragraph (3)(a) above on the last of those disposals ("the last disposal") was the amount of the gains qualifying for relief on that disposal which were, by virtue of this Schedule, not chargeable gains (the "gains actually relieved");

(ii) that the qualifying period appropriate to that disposal (as redetermined where appropriate under paragraph 14 above) was that period as extended in accordance with sub-paragraph (3)(a)(ii) above; and

(iii) that the last disposal was the only earlier disposal;

(b) there shall then be ascertained in accordance with paragraph 13(1) above (but on the assumptions in paragraph (a) above)--

(i) how much of the gains actually relieved would, by virtue of paragraph 13(1)(a) above, not have been chargeable gains; and

(ii) how much of those gains would, by virtue of paragraph 13(1)(b) above, not have been chargeable gains; and

(i) the amount ascertained under paragraph (b)(i) above; and

(ii) twice the amount ascertained under paragraph (b)(ii) above.

(6) In this paragraph "the gains qualifying for relief" has the meaning given by paragraph 13(2) above.

(7) References in this paragraph to relief given under this Schedule include references to relief given under section 34 of the [1965 c. 25.] Finance Act 1965 or section 124 of the 1979 Act; and--

(a) in relation to relief given under either of those sections, paragraph (b) of sub-paragraph (1) above shall have effect as if, for the words from "which was" onwards, there were substituted "made by the individual"; and

(b) for the purpose of determining the limit in sub-paragraph (3) above where the earlier disposal (or any of the earlier disposals) was a disposal in respect of which relief was given under either of those sections--

(i) the underlying gains relieved on that disposal shall (subject to sub-paragraph (5) above) be taken to be gains of an amount equal to the relief given under the section in question in respect of that disposal; and

(ii) the reference in sub-paragraph (3)(a)(ii) above to the qualifying period appropriate to the earlier disposal shall be taken to be a reference to the qualifying period within the meaning of the section in question.

Aggregation of spouse's interest in the business

16 (1) In any case where--

(a) an individual makes a material disposal of business assets, and

(b) the subject matter of that disposal (whether business, assets or shares or securities) was acquired, in whole or in part, from that individual's spouse, and

(c) that acquisition was either under the will or intestacy of the spouse or by way of lifetime gift and in the year of assessment in which occurred the spouse's death or, as the case may be, the lifetime gift, the individual and his spouse were living together, and

(d) as a result of the acquisition the individual acquired the whole of the interest in the business, assets, shares or securities concerned which, immediately before the acquisition or, as the case may be, the spouse's death, was held by the spouse, and

(e) not later than 2 years after the end of the year of assessment in which the material disposal occurred, the individual elects that this paragraph should apply,

the period which, apart from this paragraph, would be the qualifying period appropriate to that disposal shall be extended by assuming that, in the conditions which under section 163 are the relevant conditions applicable to the disposal, any reference to the individual were a reference either to the individual or his spouse.

(2) An election under sub-paragraph (1)(e) above shall be made by notice to the inspector.

(3) Where the acquisition referred to in sub-paragraph (1)(c) above was by way of lifetime gift, the amount available for relief on the material disposal concerned, having regard to the extension of the qualifying period under sub-paragraph (1) above, shall not exceed the limit specified in sub-paragraph (4) below.

(4) The limit referred to in sub-paragraph (3) above is the amount which would have been available for relief on the material disposal if--

(a) the lifetime gift had not occurred; and

(b) the material disposal had been made by the spouse; and

(c) anything done by the individual in relation to the business concerned after the lifetime gift was in fact made had been done by the spouse.

Section 165.

SCHEDULE 7 Relief for gifts of business assets

Part I Agricultural property and settled property

Agricultural property

1 (1) This paragraph applies where--

(a) there is a disposal of an asset which is, or is an interest in, agricultural property within the meaning of Chapter II of Part V of the [1984 c. 51.] Inheritance Tax Act 1984 (inheritance tax relief for agricultural property), and

(b) apart from this paragraph, the disposal would not fall within section 165(1) by reason only that the agricultural property is not used for the purposes of a trade carried on as mentioned in section 165(2)(a).

(2) Where this paragraph applies, section 165(1) shall apply in relation to the disposal if the circumstances are such that a reduction in respect of the asset--

(a) is made under Chapter II of Part V of the Inheritance Tax Act 1984 in relation to a chargeable transfer taking place on the occasion of the disposal, or

(b) would be so made if there were a chargeable transfer on that occasion, or

(c) would be so made but for section 124A of that Act (assuming, where there is no chargeable transfer on that occasion, that there were).

Settled property

2 (1) If--

(a) the trustees of a settlement make a disposal otherwise than under a bargain at arm's length of an asset within sub-paragraph (2) below, and

(b) a claim for relief under section 165 is made by the trustees and the person who acquires the asset ("the transferee") or, where the trustees of a settlement are also the transferee, by the trustees making the disposal alone,

then, subject to sections 165(3), 166, 167 and 169, section 165(4) shall apply in relation to the disposal.

(2) An asset is within this sub-paragraph if--

(a) it is, or is an interest in, an asset used for the purposes of a trade, profession or vocation carried on by--

(i) the trustees making the disposal, or

(ii) a beneficiary who had an interest in possession in the settled property immediately before the disposal, or

(b) it consists of shares or securities of a trading company, or of the holding company of a trading group, where--

(i) the shares or securities are neither quoted on a recognised stock exchange nor dealt in on the Unlisted Securities Market, or

(ii) not less than 25 per cent. of the voting rights exercisable by shareholders of the company in general meeting are exercisable by the trustees at the time of the disposal.

(3) Where section 165(4) applies by virtue of this paragraph, references to the trustees shall be substituted for the references in section 165(4)(a) to the transferor; and where it applies in relation to a disposal which is deemed to occur by virtue of section 71(1) or 72(1) section 165(7) shall not apply.

3 (1) This paragraph applies where--

(a) there is a disposal of an asset which is, or is an interest in, agricultural property within the meaning of Chapter II of Part V of the [1984 c. 51.] Inheritance Tax Act 1984, and

(b) apart from this paragraph, the disposal would not fall within paragraph 2(1)(a) above by reason only that the agricultural property is not used for the purposes of a trade as mentioned in paragraph 2(2)(a) above.

(2) Where this paragraph applies paragraph 2(1) above shall apply in relation to the disposal if the circumstances are such that a reduction in respect of the asset--

(a) is made under Chapter II of Part V of the Inheritance Tax Act 1984 in relation to a chargeable transfer taking place on the occasion of the disposal, or

(b) would be so made if there were a chargeable transfer on that occasion, or

(c) would be so made but for section 124A of that Act (assuming, where there is no chargeable transfer on that occasion, that there were).

Part II Reductions in held-over gain

Application and interpretation

4 (1) The provisions of this Part of this Schedule apply in cases where a claim for relief is made under section 165.

(2) In this Part of this Schedule--

(a) "the principal provision" means section 165(2), or, as the case may require, sub-paragraph (2) of paragraph 2 above,

(b) "shares" includes securities,

(c) "the transferor" has the same meaning as in section 165 except that, in a case where paragraph 2 above applies, it refers to the trustees mentioned in that paragraph, and

(d) "unrelieved gain", in relation to a disposal, has the same meaning as in section 165(7).

(3) In this Part of this Schedule--

(a) any reference to a disposal of an asset is a reference to a disposal which falls within subsection (1) of section 165 by virtue of subsection (2)(a) of that section or, as the case may be, falls within sub-paragraph (1) of paragraph 2 above by virtue of sub-paragraph (2)(a) of that paragraph, and

(b) any reference to a disposal of shares is a reference to a disposal which falls within subsection (1) of section 165 by virtue of subsection (2)(b) of that section or, as the case may be, falls within sub-paragraph (1) of paragraph 2 above by virtue of sub-paragraph (2)(b) of that paragraph.

(4) In relation to a disposal of an asset or of shares, any reference in the following provisions of this Part of this Schedule to the held-over gain is a reference to the held-over gain on that disposal as determined under subsection (6) or, where it applies, subsection (7) of section 165.

Reductions peculiar to disposals of assets

5 (1) If, in the case of a disposal of an asset, the asset was not used for the purposes of the trade, profession or vocation referred to in paragraph (a) of the principal provision throughout the period of its ownership by the transferor, the amount of the held-over gain shall be reduced by multiplying it by the fraction--

---

where--

A is the number of days in that period of ownership during which the asset was so used, and
B is the number of days in that period.

(2) This paragraph shall not apply where the circumstances are such that a reduction in respect of the asset--

(a) is made under Chapter II of Part V of the [1984 c. 51.] Inheritance Tax Act 1984 in relation to a chargeable transfer taking place on the occasion of the disposal, or

(b) would be so made if there were a chargeable transfer on that occasion, or

(c) would be so made but for section 124A of that Act (assuming, where there is no chargeable transfer on that occasion, that there were).

6 (1) If, in the case of a disposal of an asset, the asset is a building or structure and, over the period of its ownership by the transferor or any substantial part of that period, part of the building or structure was, and part was not, used for the purposes of the trade, profession or vocation referred to in paragraph (a) of the principal provision, there shall be determined the fraction of the unrelieved gain on the disposal which it is just and reasonable to apportion to the part of the asset which was so used, and the amount of the held-over gain (as reduced, if appropriate, under paragraph 5 above) shall be reduced by multiplying it by that fraction.

(2) This paragraph shall not apply where the circumstances are such that a reduction in respect of the asset--

(a) is made under Chapter II of Part V of the Inheritance Tax Act 1984 in relation to a chargeable transfer taking place on the occasion of the disposal, or

(b) would be so made if there were a chargeable transfer on that occasion, or

(c) would be so made but for section 124A of that Act (assuming, where there is no chargeable transfer on that occasion, that there were).

Reduction peculiar to disposal of shares

7 (1) If in the case of a disposal of shares assets which are not business assets are included in the chargeable assets of the company whose shares are disposed of, or, where that company is the holding company of a trading group, in the group's chargeable assets, and either--

(a) at any time within the period of 12 months before the disposal not less than 25 per cent. of the voting rights exercisable by shareholders of the company in general meeting are exercisable by the transferor, or

(b) the transferor is an individual and, at any time within that period, the company is his family company,

the amount of the held-over gain shall be reduced by multiplying it by the fraction--

---

where--

A is the market value on the date of the disposal of those chargeable assets of the company or of the group which are business assets, and
B is the market value on that date of all the chargeable assets of the company, or as the case may be of the group.

(2) For the purposes of this paragraph--

(a) an asset is a business asset in relation to a company or a group if it is or is an interest in an asset used for the purposes of a trade, profession or vocation carried on by the company, or as the case may be by a member of the group; and

(b) an asset is a chargeable asset in relation to a company or a group at any time if, on a disposal at that time, a gain accruing to the company, or as the case may be to a member of the group, would be a chargeable gain.

(3) Where the shares disposed of are shares of the holding company of a trading group, then for the purposes of this paragraph--

(a) the holding by one member of the group of the ordinary share capital of another member shall not count as a chargeable asset, and

(b) if the whole of the ordinary share capital of a 51 per cent. subsidiary of the holding company is not owned directly or indirectly by that company, the value of the chargeable assets of the subsidiary shall be taken to be reduced by multiplying it by the fraction--

---

where--

A is the amount of the ordinary share capital of the subsidiary owned directly or indirectly by the holding company, and
B is the whole of that share capital.

(4) Expressions used in sub-paragraph (3) above have the same meanings as in section 838 of the Taxes Act.

Reduction where gain partly relieved by retirement relief

8 (1) If, in the case of a disposal of an asset--

(a) the disposal is of a chargeable business asset and is comprised in a disposal of the whole or part of a business in respect of gains accruing on which the transferor is entitled to relief under Schedule 6, and

(b) apart from this paragraph, the held-over gain on the disposal (as reduced, where appropriate, under the preceding provisions of this Part of this Schedule) would exceed the amount of the chargeable gain which, apart from section 165 would accrue on the disposal,

the amount of that held-over gain shall be reduced by the amount of the excess.

(2) In sub-paragraph (1) above "chargeable business asset" has the same meaning as in Schedule 6.

(3) If, in the case of a disposal of shares,--

(a) the disposal is or forms part of a disposal of shares in respect of the gains accruing on which the transferor is entitled to relief under Schedule 6, and

(b) apart from this paragraph, the held-over gain on the disposal (as reduced, where appropriate, under paragraph 7 above) would exceed an amount equal to the relevant proportion of the chargeable gain which, apart from section 165, would accrue on the disposal,

the amount of that held-over gain shall be reduced by the amount of the excess.

(4) In sub-paragraph (3) above "the relevant proportion", in relation to a disposal falling within paragraph (a) of that sub-paragraph, means the appropriate proportion determined under Schedule 6 in relation to the aggregate sum of the gains which accrue on that disposal.

Section 240.

SCHEDULE 8 Leases

Leases of land as wasting assets: curved line restriction of allowable expenditure

1 (1) A lease of land shall not be a wasting asset until the time when its duration does not exceed 50 years.

(2) If at the beginning of the period of ownership of a lease of land it is subject to a sublease not at a rackrent and the value of the lease at the end of the duration of the sublease, estimated as at the beginning of the period of ownership, exceeds the expenditure allowable under section 38(1)(a) in computing the gain accruing on a disposal of the lease, the lease shall not be a wasting asset until the end of the duration of the sublease.

(3) In the case of a wasting asset which is a lease of land the rate at which expenditure is assumed to be written off shall, instead of being a uniform rate as provided by section 46, be a rate fixed in accordance with the Table below.

(4) Accordingly, for the purposes of the computation of the gain accruing on a disposal of a lease, and given that--

(a) the percentage derived from the Table for the duration of the lease at the beginning of the period of ownership is P(1),

(b) the percentage so derived for the duration of the lease at the time when any item of expenditure attributable to the lease under section 38(1)(b) is first reflected in the nature of the lease is P(2), and

then--

(i) there shall be excluded from the expenditure attributable to the lease under section 38(1)(a) a fraction equal to--

---

and

(ii) there shall be excluded from any item of expenditure attributable to the lease under section 38(1)(b) a fraction equal to--

---

(5) This paragraph applies notwithstanding that the period of ownership of the lease is a period exceeding 50 years and, accordingly, no expenditure shall be written off under this paragraph in respect of any period earlier than the time when the lease becomes a wasting asset.

(6) Section 47 shall apply in relation to this paragraph as it applies in relation to section 46.

Table

50 (or more)	100
49	99.657
48	99.289
47	98.902
46	98.490
45	98.059
44	97.595
43	97.107
42	96.593
41	96.041
40	95.457
39	94.842
38	94.189
37	93.497
36	92.761
35	91.981
34	91.156
33	90.280
32	89.354
31	88.371
30	87.330
29	86.226
28	85.053
27	83.816
26	82.496
25	81.100
24	79.622
23	78.055
22	76.399
21	74.635
20	72.770
19	70.791
18	68.697
17	66.470
16	64.116
15	61.617
14	58.971
13	56.167
12	53.191
11	50.038
10	46.695
9	43.154
8	39.399
7	35.414
6	31.195
5	26.722
4	21.983
3	16.959
2	11.629
1	5.983
0	0

If the duration of the lease is not an exact number of years the percentage to be derived from the Table above shall be the percentage for the whole number of years plus one-twelfth of the difference between that and the percentage for the next higher number of years for each odd month counting an odd 14 days or more as one month.

Premiums for leases

2 (1) Subject to this Schedule where the payment of a premium is required under a lease of land, or otherwise under the terms subject to which a lease of land is granted, there is a part disposal of the freehold or other asset out of which the lease is granted.

(2) In applying section 42 to such a part disposal, the property which remains undisposed of includes a right to any rent or other payments, other than a premium, payable under the lease, and that right shall be valued as at the time of the part disposal.

3 (1) This paragraph applies in relation to a lease of land.

(2) Where under the terms subject to which a lease is granted, a sum becomes payable by the tenant in lieu of the whole or part of the rent for any period, or as consideration for the surrender of the lease, the lease shall be deemed for the purposes of this Schedule to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of that sum for the period in relation to which the sum is payable.

(3) Where, as consideration for the variation or waiver of any of the terms of a lease, a sum becomes payable by the tenant otherwise than by way of rent, the lease shall be deemed for the purposes of this Schedule to have required the payment of a premium to the landlord (in addition to any other premium) of the amount of that sum for the period from the time when the variation or waiver takes effect to the time when it ceases to have effect.

(4) If under sub-paragraph (2) or (3) above a premium is deemed to have been received by the landlord, otherwise than as consideration for the surrender of the lease, then subject to sub-paragraph (5) below, both the landlord and the tenant shall be treated as if that premium were, or were part of, the consideration for the grant of the lease due at the time when the lease was granted, and the gain accruing to the landlord on the disposal by way of grant of the lease shall be recomputed and any necessary adjustments of tax, whether by way of assessment for the year in which the premium is deemed to have been received, or by way of discharge or repayment of tax, made accordingly.

(5) If under sub-paragraph (2) or (3) above a premium is deemed to have been received by the landlord, otherwise than as consideration for the surrender of the lease, and the landlord is a tenant under a lease the duration of which does not exceed 50 years, this Schedule shall apply as if an amount equal to the amount of that premium deemed to have been received had been given by way of consideration for the grant of the part of the sublease covered by the period in respect of which the premium is deemed to have been paid as if that consideration were expenditure incurred by the sublessee and attributable to that part of the sublease under section 38(1)(b).

(6) Where under sub-paragraph (2) above a premium is deemed to have been received as consideration for the surrender of a lease the surrender of the lease shall not be the occasion of any recomputation of the gain accruing on the receipt of any other premium, and the premium which is consideration for the surrender of the lease shall be regarded as consideration for a separate transaction consisting of the disposal by the landlord of his interest in the lease.

(7) Sub-paragraph (3) above shall apply in relation to a transaction not at arm's length, and in particular in relation to a transaction entered into gratuitously, as if such sum had become payable by the tenant otherwise than by way of rent as might have been required of him if the transaction had been at arm's length.

Subleases out of short leases

4 (1) In the computation of the gain accruing on the part disposal of a lease which is a wasting asset by way of the grant of a sublease for a premium the expenditure attributable to the lease under paragraphs (a) and (b) of section 38(1) shall be apportioned in accordance with this paragraph, and section 42 shall not apply.

(2) Out of each item of the expenditure attributable to the lease under paragraphs (a) and (b) of section 38(1) there shall be apportioned to what is disposed of--

(a) if the amount of the premium is not less than what would be obtainable by way of premium for the said sublease if the rent payable under that sublease were the same as the rent payable under the lease, the fraction which, under paragraph 1(3) of this Schedule, is to be written off over the period which is the duration of the sublease, and

(b) if the amount of the premium is less than the said amount so obtainable, the said fraction multiplied by a fraction equal to the amount of the said premium divided by the said amount so obtainable.

(3) If the sublease is a sublease of part only of the land comprised in the lease this paragraph shall apply only in relation to a proportion of the expenditure attributable to the lease under paragraphs (a) and (b) of section 38(1) which is the same as the proportion which the value of the land comprised in the sublease bears to the value of that and the other land comprised in the lease; and the remainder of that expenditure shall be apportioned to what remains undisposed of.

Exclusion of premiums taxed under Schedule A etc.

5 (1) Where by reference to any premium income tax has become chargeable under section 34 of the Taxes Act on any amount, that amount out of the premium shall be excluded from the consideration brought into account in the computation of the gain accruing on the disposal for which the premium is consideration except where the consideration is taken into account in the denominator of the fraction by reference to which an apportionment is made under section 42.

(2) Where by reference to any premium in respect of a sublease granted out of a lease the duration of which (that is of the lease) does not, at the time of granting the lease, exceed 50 years, income tax has become chargeable under section 34 of the Taxes Act on any amount that amount shall be deducted from any gain accruing on the disposal for which the premium is consideration as computed in accordance with the provisions of this Act apart from this sub-paragraph, but not so as to convert the gain into a loss, or to increase any loss.

(3) Subject to subsection (4) below, where income tax has become chargeable under section 36 of the Taxes Act (sale of land with right of re-conveyance) on any amount a sum of that amount shall be excluded from the consideration brought into account in the computation of the gain accruing on the disposal of the estate or interest in respect of which income tax becomes so chargeable, except where the consideration is taken into account in the denominator of the fraction by reference to which an apportionment is made under section 42.

(4) If what is disposed of is the remainder of a lease or a sublease out of a lease the duration of which does not exceed 50 years, sub-paragraph (3) shall not apply but the amount there referred to shall be deducted from any gain accruing on the disposal as computed in accordance with the provisions of this Act apart from this sub-paragraph and sub-paragraph (3), but not so as to convert the gain into a loss, or to increase any loss.

(5) References in sub-paragraphs (1) and (2) above to a premium include references to a premium deemed to have been received under subsection (4) or (5) of section 34 of the Taxes Act (which correspond to paragraph 3(2) and (3) of this Schedule).

(6) Section 37 shall not be taken as authorising the exclusion of any amount from the consideration for a disposal of assets taken into account in the computation of the gain by reference to any amount chargeable to tax under section 348 or 349 of the Taxes Act.

6 (1) If under section 37(4) of the Taxes Act (allowance where, by the grant of a sublease, a lessee has converted a capital amount into a right to income) a person is to be treated as paying additional rent in consequence of having granted a sublease, the amount of any loss accruing to him on the disposal by way of the grant of the sublease shall be reduced by the total amount of rent which he is thereby treated as paying over the term of the sublease (and without regard to whether relief is thereby effectively given over the term of the sublease), but not so as to convert the loss into a gain, or to increase any gain.

(2) Nothing in section 37 of this Act shall be taken as applying in relation to any amount on which tax is paid under section 35 of the Taxes Act (charge on assignment of lease granted at undervalue).

(3) If any adjustment is made under section 36(2)(b) of the Taxes Act on a claim under that paragraph, any necessary adjustment shall be made to give effect to the consequences of the claim on the operation of this paragraph or paragraph 5 above.

7 If under section 34(2) and (3) of the Taxes Act income tax is chargeable on any amount, as being a premium the payment of which is deemed to be required by the lease, the person so chargeable shall be treated for the purposes of the computation of any gain accruing to him as having incurred at the time the lease was granted expenditure of that amount (in addition to any other expenditure) attributable to the asset under section 38(1)(b).

Duration of leases

8 (1) In ascertaining for the purposes of this Act the duration of a lease of land the following provisions shall have effect.

(2) Where the terms of the lease include provision for the determination of the lease by notice given by the landlord, the lease shall not be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice given by the landlord.

(3) Where any of the terms of the lease (whether relating to forfeiture or to any other matter) or any other circumstances render it unlikely that the lease will continue beyond a date falling before the expiration of the term of the lease, the lease shall not be treated as having been granted for a term longer than one ending on that date.

(4) Sub-paragraph (3) applies in particular where the lease provides for the rent to go up after a given date, or for the tenant's obligations to become in any other respect more onerous after a given date, but includes provision for the determination of the lease on that date, by notice given by the tenant, and those provisions render it unlikely that the lease will continue beyond that date.

(5) Where the terms of the lease include provision for the extension of the lease beyond a given date by notice given by the tenant this paragraph shall apply as if the term of the lease extended for as long as it could be extended by the tenant, but subject to any right of the landlord by notice to determine the lease.

(6) It is hereby declared that the question what is the duration of a lease is to be decided, in relation to the grant or any disposal of the lease, by reference to the facts which were known or ascertainable at the time when the lease was acquired or created.

Leases of property other than land

9 (1) Paragraphs 2, 3, 4 and 8 of this Schedule shall apply in relation to leases of property other than land as they apply to leases of land, but subject to any necessary modifications.

(2) Where by reference to any capital sum within the meaning of section 785 of the Taxes Act (leases of assets other than land) any person has been charged to income tax on any amount, that amount out of the capital sum shall be deducted from any gain accruing on the disposal for which that capital sum is consideration, as computed in accordance with the provisions of this Act apart from this sub-paragraph, but not so as to convert the gain into a loss, or increase any loss.

(3) In the case of a lease of a wasting asset which is movable property the lease shall be assumed to terminate not later than the end of the life of the wasting asset.

Interpretation

10 (1) In this Act, unless the context otherwise requires "lease"--

(a) in relation to land, includes an underlease, sublease or any tenancy or licence, and any agreement for a lease, underlease, sublease or tenancy or licence and, in the case of land outside the United Kingdom, any interest corresponding to a lease as so defined,

(b) in relation to any description of property other than land, means any kind of agreement or arrangement under which payments are made for the use of, or otherwise in respect of, property,

and "lessor", "lessee" and "rent" shall be construed accordingly.

(2) In this Schedule "premium" includes any like sum, whether payable to the intermediate or a superior landlord, and for the purposes of this Schedule any sum (other than rent) paid on or in connection with the granting of a tenancy shall be presumed to have been paid by way of premium except in so far as the other sufficient consideration for the payment is shown to have been given.

(3) In the application of this Schedule to Scotland "premium" includes in particular a grassum payable to any landlord or intermediate landlord on the creation of a sublease.

Section 288.

SCHEDULE 9 Gilt-edged securities

Part I General

1 For the purposes of this Act "gilt-edged securities" means the securities specified in Part II of this Schedule, and such stocks and bonds issued under section 12 of the [1968 c. 13.] National Loans Act 1968, denominated in sterling and issued after 15th April 1969, as may be specified by order made by the Treasury.

2 The Treasury shall cause particulars of any order made under paragraph 1 above to be published in the London and Edinburgh Gazettes as soon as may be after the order is made.

3 Section 14(b) of the [1978 c. 30.] Interpretation Act 1978 (implied power to amend orders made by statutory instrument) shall not apply to the power of making orders under paragraph 1 above.

Part II Existing gilt-edged securities

Stocks and bonds charged on the National Loans Fund

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