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Can you defer pre-revenue costs?

Can you defer pre-revenue rent, rates etc of a leasehold building whilst you fit it out?

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Hi there

My business' landlord is building an extension to our existing premises. We will then lease the extension from him, however it will take us a year to fit-out. During that time we will therefore be paying rent, rates, electricity etc, with no revenue to offset them.

Is there a clever accounting treatment whereby you can defer these costs and then amortise them over [x] years once we are generating revenue from the building (I assume we couldn't capitalise them as unlike the fit-out costs, they don't generate value). I've been doing a lot of Googling and am drawing blanks!

Any help would be gratefully received!

Many thanks!


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23rd Jan 2019 10:38

That’s obviously a question for the accountant who will be preparing the accounts of your business for the period in question. Why on earth are you coming to an internet forum to ask random strangers? Make your accountant work for the money you paying him or her.

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23rd Jan 2019 10:39

nickspam wrote:

I've been doing a lot of Googling and am drawing blanks!!

You just need to look in the right place.

These people are pretty good on technical accounting matters:

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23rd Jan 2019 10:39

I could make an argument that the electricity used in the extension might be part of the cost of the fitting out of same but cannot see same argument re rent, rates etc.

One avenue re rates will depend on stage of construction building is at when passed to you, but property might escape having a rates charge until building extension gets to completion stage-key will be is your fit out merely decorative or functional re the extension being capable of use?

A rent free period from Landlord ought to be attempted to be negotiated from a commercial point of view but will do little re the cost recognition as any rent free element ought to be recognised throughout the lease term not at the outset period, irrespective as to when it acts as a reducer re the rent actually paid.

I think you are butting your head against Prudence here, and Prudence tends to win these sorts of discussions.

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23rd Jan 2019 11:07

Many thanks DJKL. That's much along the lines of my thinking. :o)

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