Client granted a 26 year lease (agricultural land) out of a freehold, for a premium + annual rent.
In calculating the base cost to deduct from the CGT element of the premium I have two problems.
1) Determining the value of the reversionary interest in the land, and
2) Determining the value of the right to receive the annual rent.
The total of these two elements make up "B" in your part disposal A/(A'+B) calc.
In the examples in CG70962 these are given.
If the current value of the land is (say) £10K per acre, how should I convert that to the current value of a reversionary interest in 26 years time?
The annual rent is £700. Excel will tell me the NPV of 26 years rent, provided that I give it a rate of return. I would expect a consistent and published percentage to be used for this; Any suggestions?
Thanks
With kind regards
Clint Westwood