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Readers' Forum
Replies to Queries — 2
Onerous lease
It is generally thought that a payment to a landlord to secure the release from an onerous lease is a capital payment. However, the Revenue is denying relief under section 38(2), Taxation of Chargeable Gains Act 1992 on the grounds that the expense is not an incidental cost of disposal.
Readers' Forum
Replies to Queries — 2
Onerous lease
It is generally thought that a payment to a landlord to secure the release from an onerous lease is a capital payment. However, the Revenue is denying relief under section 38(2), Taxation of Chargeable Gains Act 1992 on the grounds that the expense is not an incidental cost of disposal.
Does the payment qualify under section 38(1), based on the decision in Bullrun Inc v Inspector of Taxes [2000] STC (SCD) 384, which stated that 'It seems reasonably logical to start with the assumption that money spent on the acquisition of the asset should be regarded as capital expenditure. Extensions from this are, first, to regard money spent on getting rid of a disadvantageous asset as capital expenditure and, secondly, to regard money spent on improving the asset, or making it more advantageous, as capital expenditure'?
This seems logical; the expense has improved the asset to the extent that it can now be easily disposed of.
Do readers think this is a departure from the Revenue's long held view?
(Query T16,477)
