Accounting for Rent-free periods
November 7th, 2011
In the current economic climate, it may be possible to negotiate rent-free periods for your company. Normally, corporation tax relief is given when the expense has been incurred or an invoice received. For rent-free periods, however, there is a different treatment allowed.
If, for example, you have a 10 year lease with a 12 month rent-free period on your premises, you can calculate the rent for the 10 years, calculate the average charge over 10 years and claim it against your income over the 10 years, rather than as you pay it.
If you have rent reviews so that you won’t know the rent for the 10 years, you can calculate the average rent for the period you do know (possibly 3 or 4 years) and claim that over the period.
Ultimately, it all ends up with you claiming the same amount of rent against tax but it may help cashflow in the early years.
The content of this article is for general information only. It should not be relied on and action which could affect your business or personal circumstances should not be taken without appropriate professional advice.
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