Illustration - sale of a lease 2
In this illustration, you'll learn how to calculate the chargeable gain on a short lease disposal where the lease term doesn't align neatly with whole years.
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In this lesson
- 0:00 Lease disposal with remaining term calculation
- 0:33 Calculating the exact lease length remaining
- 1:04 Interpolating percentage for non-whole years
- 1:58 Apportioning cost using adjusted lease percentages
About this lesson
Henry acquired a 42-year lease and sold it five months into year 15, meaning he's selling a 27-year-seven-month lease—a key detail that affects how you apportion the original cost. The core technique involves working with lease percentages to find the proportion of original cost attributable to the disposal. Since lease percentage tables only provide figures for whole years, you'll need to calculate an interim percentage for the seven-month period by finding the annual rate between years 27 and 28, then applying that monthly rate to the partial year. Once you have the correct percentage for the 27-year-seven-month lease, you apportion the original cost by comparing this percentage to the percentage for the original 42-year lease. This approach is essential for Taxation (TX) and Advanced Taxation (ATX) questions involving short lease disposals, where precision in calculating the cost base directly affects your chargeable gain figure. Master this method and you'll handle any lease disposal scenario with confidence.
Duration: 2m
Transcript
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