I am selling a property which will have a sizeable capital gain (capital gains tax (CGT) will be approximately £100,000). At the same time as the exchange of contracts, I am planning to sell the benefit of a lease extension. The premium for the extension of 90 years is likely to be around £60,000 (I used a specialist surveyor for this – and the freeholder will, in turn, have a survey for which I will pay). My accountant tells me that the premium to extend the lease is a cost and is not an allowable expense for CGT purposes. But I have read elsewhere that it is an allowable expense. Also, are my expenses or costs of sale allowable expenses?  

Arthur Weller replies:  

It appears from your question that you are a leaseholder of some land with X years to run on the lease. You are selling your leasehold rights to someone else. You are extending the lease by 90 years (by purchasing it from the freeholder), so you are selling a lease (of (X + 90 years) to the purchaser. This is enhancement expenditure (see HMRC’s Capital Gains manual at CG15180) and an allowable expense in your CGT computation. Additionally, your costs of sale are an allowable expense (see CG15250).