A client bought 20 years lease to open a restaurant. The mortisation of lease is at 5% of the lease is going to be provide as expenses in the account. What will be the tax treatment for the amortisation? As I understand, it will be different from normal capital allowance.
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Terence
Terence
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A trading expense ??
Lease amortisation is indeed different from capital allowances -- do as you please in the accounts but it ain't going to be recognised as a trading expense for income tax purposes.
If the client assigns the lease (before expiry) to another party and with the consent of the landlord, any sum received is subject to CGT and the original cost to be employed in the computation will be written down in line with an amortisation table you will find in TCGA 1992.
The word used is "bought" -- off the existing leaseholder or are we actually dealing with a premium paid for a brand new lease?
If the latter, the landlord will have been charged to Schedule A on a proportion (the formula will be set out in any basic textbook).
That proportion can, in turn ,be treated as additional rent paid by the restaurater and claimed over the life of the lease. If relevant, has this been considered ?