Tenant makes major improvements to a rented property.

If a landlord rents a commercial property to a tenant and the tenant makes signifcant improvements to the property (e.g. extensions) thereby increasing the buildings total value how should this be treated in the accounts of both businesses? FYI - Market value of the building has been doubled by the improvements

WOuld costs of the improvements simply be recorded as leashold improvement in the tenants accounts  and subject to depreciation / AIA / capital allowances?

Of course the improvements has a significant effect on value of the property and hence when revalued in the landlords accounts will show a profit?

Does the fact the landlord and tenant are connected make any difference?

Thanks for any assistance

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This is what is known as a "nothing"

Phil Rees |
Phil Rees's picture

PIM1212 - deemed lease premium

DMGbus |
DMGbus's picture