Inter company recharging-rent free periods

Intercompany recharging

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Hi,

The holding company has a lease that has a two month rent free period over the course of a five year lease. Rent per year is £410k and rent free equals £68k (£410k /12). Typically this would be posted as follows:

cr: prepaid rent £68k and dr: rent paid £68k and the rent free period is amortised over the course of the lease. All charges in this holding company are typically recharged to its subsidiaries. 

My question is should this £68k related to the rent free period that has been debited to the rent paid be recharged to the subsidiaries?? Can anyone please provide some guidance.

my thinking is that it should be as the holding company is treated like a recharge centre.

Thanks in advance 

 

 

 

 

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Worm
By TheLambtonWorm
25th Oct 2016 08:54

The parent can charge what it wants to the subsidiaries, assuming that the lease is in the name of the parent and that it can legally do so.

The rent in it's accounts for a 12 month period is just worked out as the total lease payments payable over the term of the lease, multiplied by 12/60.

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