Finance Act 1974

Deemed disposals in cases involving the grant of a lease for a premium

16 (1) Where an interest in land is under subsection (1) of the principal section or pararaph 2(3) of this Schedule deemed to have been disposed of on a particular date and before that date (but after 17th December 1973) there was a part disposal of that interest by way of the grant of a lease or sub-lease at a premium, then, if income tax has become chargeable under section 80 of the Taxes Act on any amount by reference to that premium so that an exclusion or deduction of that amount falls to be made under paragraph 5(1) or (2) of Schedule 8 to the Finance Act 1965, the two following sub-paragraphs shall apply; and in those sub-paragraphs " the said interest" means the interest in land first mentioned in this sub-paragraph.

(2) In computing under Schedule 6 to the [1965 c. 25.] Finance Act 1965 the amount of the gain accruing on the disposal of the said interest—

(a) the consideration for the disposal shall be treated as increased by an amount equal to the premium paid in respect of the grant of the said lease or sub-lease ;

(b) the sums allowable by virtue of paragraphs (a) and (b) of paragraph 4(1) of that Schedule as a deduction from the consideration for the disposal shall be treated as including any part of those sums which is as a result of an apportionment under paragraph 7 of that Schedule allowable as a deduction in computing under that Schedule the amount of the gain accruing on the part disposal; and

(c) the gain as computed in accordance with (a) and (b) above shall then be reduced by the amount of any gain which (after any exclusion or deduction falling to be made under the said paragraph 5(1) or (2)) accrued on the part disposal, and the amount resulting from that reduction shall (subject to section 38(2) of this Act) be taken as the amount of the gain accruing on the disposal of the said interest.

(3) In a case falling within sub-paragraph (1) above involving more than one part disposal in relation to which sub-paragraph (2) above is applicable, the provisions of sub-paragraph (2)(a) and (b) above shall operate cumulatively as regards those part disposals, and the reference in sub-paragraph (2)(c) above to the gain as computed in accordance with those provisions shall be construed accordingly.

(4) In this and the following paragraph " premium " has the same meaning as in paragraph 5(1) and (2) of Schedule 8 to the Finance Act 1965.

17 Where an interest in land is under subsection (1) of the principal section or paragraph 2(3) of this Schedule deemed to have been disposed of on a particular date and on that date there was a part disposal of that interest in consequence of the grant out of that interest of a lease in respect of which a premium was required under that lease or otherwise under the terms subject to which that lease was granted, that part disposal shall be disregarded for all purposes of Part III of the Finance Act 1965.

18 Where an interest in land consisting of a reversion on a lease is under subsection (1) of the principal section or paragraph 2(3) of this Schedule deemed to have been disposed of, paragraph 7 of Schedule 8 to the Finance Act 1965 (deduction allowable under paragraph 4(1)(b) of Schedule 6 to the Finance Act 1965 in respect of amount chargeable to tax under section 80(2) of the Taxes Act as being a premium the payment of which is deemed to be required by a lease) shall not apply for the purposes of the computation of any gain accruing on the disposal.