Lease Flashcards
Explain the treatments of the assignment of a long term lease
Assignment - All charged to CGT
Treated as a disposal for CGT purposes
Buy:
Sell:
Expire:
Proceeds: Premium
Cost: Orginal cost
Gain
W1 Cost: Orginal cost * a/b
but a and b = 100%
Explain the treatment of the assignment of a short term lease
Assignment - All charged to CGT
Treated as a disposal for CGT purposes
Buy:
Sell:
Expire:
Proceeds:
Cost W1
Gain
Cost W1 = orginal cost * number of years left on lease%/ total number of years of the lease%
Use Lease % table
Wasting chatel how ever the lease does not waster uniformely. As the lease draws closer to the end the value of the lease drops at a higher rate
What is the assingment of a lease
Selling the reamining part of the lease to someone else. Same asset sold
Expalin the granting of a longer term lease from freehold
Income tax
No charge to income tax as a long lease
CGT
Proceeds
Cost W1
Gain
Cost W1 = orginal cost * A/ A+B
A = premium
B = reversion value
Explain the grant of a short term lease from a freehold
Income tax
Premium * 50-Y /50
CGT
Proceeds
Cost W1
Charge to IT
Cost W1 = orgianl cost * a /A+B
a = premium charge to CGT
A = premium
B = reversion value
Explain the grant of a short term lease from short term lease
Income tax
Premium received * 50 - Y /50
Minus relief for premium paid to lessor
Premium paid * 50 - Y /50
divide by the number of years of HL * number of years of SL
CGT
Proceeds
Cost W1
Charge to IT
Cost W1 = orginal cost * a-b/c
Where a, b and see are all in realtion to HL
a = at grant of sublease
b = at expiration
c = total terms of HL
Remeber to use % tables
What is the granting of a lease.
Creating a new asset from an old asset
How is the length of a lease determined
Deemed to end when:
First date the landlord can terminate the lease
First date beyond which the agreement is likely to terminate (high increase in rent)
