Tax Implication of Leasing and Getting Rent free Period for Maintenance

We’ve Signed Up For A Lease And Have Got A Rent Free Period In Exchange For Doing Work On The Building. What’s The Tax Position?

Rent paid normally counts as a deductible tax expense but in general improvements of a capital nature to a building will not give you any tax deduction. However, it may be possible to classify some of the expenditure as repairs if it is of a repair nature as opposed to being of an improvement nature and so claim a tax deduction for that. If the building is an industrial building you may be eligible for Industrial Buildings Allowances which will allow you to claim a small part of the cost each year spread over many years. An alternative way to speed up the process of getting a tax deduction is to take the whole amount of rent you will pay over the lease term of say 10 years and divided this by 10 and claim this amount each year including the first year, as opposed to claiming the amount paid each year.

A final option would be to get the landlord to still charge you the rent and then you recharge him for the improvement costs. The landlord will however be in the same position of any improvement costs not being tax deductible and if you are VAT registered you will have to charge VAT which the landlord will only be able to recover if he is VAT registered.

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