Rent-free period

I have just entered into a five-year lease for a shop and my landlord has given me a two-year rent-free period because he struggled to get a tenant. My annual rent once the rent-free period is over will be £15,000 per annum. How will I treat the rent in my accounts for the next five years

1st July 2012

The total rent you will pay over the term of the lease will be £45,000 (being £15,000 x 3 years).

Then you simply spread this across each accounting period. Assuming your first accounting period is a full year, you will have tax relief on £9,000 each year (being £45,000 ÷ 5 years).

So even though you won’t have physically paid any rent in the first two years, you will get tax relief on £18,000.

As these figures are fairly significant, you would be advised to discuss this further with your local TaxAssist Accountants though, to ensure that the accounts and tax treatment are correct.

By Jo Nockels

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