This guide considers the outline tax treatment of lease inducements made by a landlord to a prospective tenant from the point of view of the landlord.
Users of property such as retailers with significant property portfolios should consider the tax implications of the changes made by IFRS 16 to the accounting treatment of property leases for lessees.
The recent CIOT submission to HMRC on the obligation on Landlords to withhold tax under the Construction Industry Scheme (“CIS”) from certain payments to Tenants is a useful reminder of the need to consider CIS on landlords contributions to construction works.
Lessees with operating leases of property accounting under IFRS will account for these leases in a significantly different way once they adopt IFRS 16. Draft tax legislation has now been published and proposes that, where a lessee accounts under IFRS 16, the deduction for rent will be based on the amounts shown in the accounts in respect of (i) the finance charge and (ii) the depreciation charge relating to the right of use asset.