Lease extentions - taxation of premiums

[pcg007]

Freeholder grants a lease of 100 years. 35 years later the tenant applies to extend the lease.

Scenario 1: The lease is extended to 125 years. This is presumably treated as capital and the landlord is taxed on a capital receipt with the part disposal A/A+B calculating his allowable cost.

Scenario 2: The lease is extended back up to 100 years. Is this treated as the grant of a short lease of 35 years and so treated as part income and part capital, or is it treated as a long lease as above and therefore only as capital?

Or am I oversimplifying?

Grateful for any comments...

[pcg007]

OK - I think the correct answer is scenario 1:

Legally the tenant is surrendering/ selling / disposing the origninal lease and the LL is granting a new lease.

From the tenants POV there will not normally be a CGT charge by virtue of ESC D39

From the LL POV - he is granting a new lease. If that lease is over 50 years it will be a long lease and treated as capital proceeds.
We can therefore deduct legal costs and part of the original acquisition cost of the freehold in arriving at the amount taxable, subject to CGT.

Am I right?