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.