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Assets and Landlord Contributions Help

How to account for a Landlord contribution to fixture and fittings?

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Hi everyone,

We have recently entered into a lease for a new office space, which has needed a large amount of work before making it fit for purpose. We have spent a large sum of money building new walls in new locations, adding bathrooms/showers (all these items have been capitalised accordingly and the landlord has given us permission to do this work). 

We are now installing a kitchen, which the landlord has agreed to pay a proportion of this installation but I am unsure how to account for this. The landlord would like us to send him an invoice charging for the amount he is willing to pay. This is a separate agreement and the lease included nothing regarding these situations. Just for purpose of illustration:

- The kitchen costs - £10,000 plus VAT = £12,000

- The landlord will pay £9,000.00 

Would I capitalise the cost of the Kitchen and claim back the VAT? Then produce an invoice for £7,500.00 plus VAT (£9,000) and allocate this against the account the kitchen cost assigned to?

I know there are rules with Landlord contributions but I am struggling to get my head around this.

Any help will be appreciated.


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