I have a client who has a flat which is learns her a rental income. the client is filing tax returns with the rental income supplement to her personal tax return. The client has extended the lease from a 99 year to 999 year lease with the freehold held by the residents association of which she is also a shareholder.
The lease extension cost plus cost of legal expenses have been incurred and I wondered what the accounting treatment is for the cost of the extension and the legal expenses.
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Is the tax treatment the same as the accounting treatment - ie the costs are a deduction for CGT ?
Has the asset been enhanced, and is any enhancement reflected in the state of that asset at the time of the disposal.
With the facts in the OP, the answer is yes to both questions, when there is a disposal.