Taxation of Chargeable Gains Act 1992 Schedule 8 paragraph 1

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

Schedule 8 paragraph 1 sets out special rules for restricting the allowable expenditure on disposal of a short lease of land (one with 50 years or less remaining), using a curved line depreciation method rather than the standard straight line approach.

• A lease of land only becomes a wasting asset once its remaining duration falls to 50 years or less, and a statutory percentage table is used to write off allowable expenditure on a curved line basis that accelerates as the lease nears expiry.
• Two formulae reduce the allowable expenditure on disposal: acquisition cost is reduced by the fraction (P(1)−P(3))/P(1), and enhancement expenditure is reduced by the fraction (P(2)−P(3))/P(2), where the P values are percentages from the table corresponding to the lease duration at acquisition, at the date expenditure was incurred, and at disposal respectively.
• Where a lease is subject to a sublease not at a full market rent, and the lease's projected value at the end of the sublease exceeds its acquisition cost, the lease does not become a wasting asset until the sublease ends, deferring any write-off of expenditure until that point.
• If any acquisition or enhancement expenditure has qualified for capital allowances, that expenditure is not subject to the curved line write-off under these rules.