Freehold improvements

We act for a small family trading company. The freehold of the company's premises is owned as to one quarter by the company and three quarters by members of the family of the managing director. The freehold was purchased many years ago for £100 000. The cost figure on the company's balance sheet was therefore £25 000. A 20-year lease was granted to the company in 1992 after which considerable improvement expenditure was incurred amounting to £75 000. So the company's balance sheet shows £100 000 cost. Consideration is now being given to a possible sale of the premises.
If the total sale proceeds were £800 000 our client would appear to have a £100 000 gain (ignoring costs reliefs etc.). But would HMRC view the gain as £175 000 i.e. would they ignore the cost of the improvements? Perhaps the question is whether the...