If a landlord rents a commercial property to a tenant and the tenant makes signifcant improvements to the property (e.g. extensions) thereby increasing the buildings total value how should this be treated in the accounts of both businesses? FYI - Market value of the building has been doubled by the improvements
WOuld costs of the improvements simply be recorded as leashold improvement in the tenants accounts and subject to depreciation / AIA / capital allowances?
Of course the improvements has a significant effect on value of the property and hence when revalued in the landlords accounts will show a profit?
Does the fact the landlord and tenant are connected make any difference?
Thanks for any assistance