commercial property lease (lease premium?)

commercial property lease (lease premium?)

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sole trader pays a lump sum for a short lease. My understanding was that any lump sum is regarded as a "premium" and after certain adjustments the "rental" part could be claimed as an expense over the life of the lease. However, on reading the lease document, it breaks down the lump sum into only F&F and goodwill. If I hadnt read the document then I would have just claimed back the rental bit over the life.....but now I'm confused! So, my Q is....is this a "lease premium" or not!?....if it's not, sole trder seems stuffed as cant claim CA on goodwill
Jen

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By User deleted
16th Jan 2006 13:45

thanks
thank you Paul for your comments
I'm no expert on leases....just wondered if the seller was trying to avoid paying tax on the rental income part of the "premium"?

I dont quite see why my client would buy "goodwill" for the duration of the lease, as he cant sell it when the lease runs out! And as he can't claim CAs against goodwill seems not a logical thing. I'm thinking the seller must have tried to pull a fast one for whatever reason

the document refers to "grant of the lease" and later on to "assignment of goodwill"...but the premium for the grant of the lease is £nil!!

seems very dodgy to me

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By Paul Soper
16th Jan 2006 12:09

Hmmmm
So what is the "lease document" mentioner here? Is it an assignment of an interest under a lease or is it actually a business sale agreement which includes an assignment - if thats possible of course.

Is this a crude attempt to save a bit of SDLT as SDLT is not chargeable on F&F and godwill? Not likely as that would be paid by your client.

An attempt to engineer an altered liablity on the vendor - more likely- especially as goodwill would, if separate, create a gain.

However the goodwill referred to here could be inherent goodwill, rather than free goodwill, which the revenue regard as part of the value of the property.

You may need to find out what your client's legal adviser thought your client was signing - simply paying a "lump sum" could be anything - it depends on what it was legally paid for.

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