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Serviced office operator capitalise refurbishment?

Can the work we carry out to short leasehold properties be capitalised over the lease term

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We operate serviced offices out of sites that are ear marked for re-developmenton short term leases. I am having a debate with my accountant at the moment who wants us to expense the entire refurbishment programmes. We have assets such as furniture, computer equipment and fixtures and fittings that we take from site to site and can most certainly be capitalised over their useful economic life. The question is with regards to our build costs, painters, decorators, electrical install. The buildings we take on are typically in a poor and the money we spend on them is to improve the space to allow us to generate revenue from them. I want to capitalise it over the lease term but my accountant wants to expense the work as repairs. Any help would be great 

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By Accountant A
25th Apr 2019 17:00

I agree with you if that helps.

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By frankfx
25th Apr 2019 17:31

Ask accountant to explain his reasoning and contrast it with capitalising the cost.

Ask the accountant to cite his answer with reference to commercial practise and accounting guidelines. Which have been established for yonks.

He should be able to show and refer you to his research material.

You should enquire about the classification of expenditure for all tax purposes.

The tax outcome will impact cash flow.

Your accountant may discover that he /she/ you have little choice.....the expenditure can only be capitalised!


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paddle steamer
25th Apr 2019 20:33

Re these sorts of units do you enter into leases that staddle year end anyway.

The other question is what did you do with the properties prior to these leases, are these properties you previously leased to others on longer term leases that have expired and are now just getting a lick of paint between leases (albeit now short term)

If previously leased out by you and in effect a tidy up between leases I would expense.

You do not say if you own the properties or you merely lease them short term from A N Other, albeit implicit is you yourselves are short term leasing them; can you confirm?

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Replying to DJKL:
By danc87
25th Apr 2019 21:38

Thanks for the reply.

We lease the assets from developers and prior to that they have typically been sat vacant. Our first involvement with the property is at the point our lease term commences. Once we have got the asset ready for occupation we sub lease them to the flexible office market.

The lease terms vary, we closed one in January that lasted 15 months so have expensed the fit out and capitalised furniture and fittings we have taken to other sites. We have another with a 5 year term but breaks after 2 years. Another straight 2 year term.

The condition of the assets vary. The site with a 5 year term was squatted, had been vacant for four years and was uninhabitable. They all require work to be marketable is for certain.

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