BIM46420 - Specific deductions: professional fees: renewal of leases

Practical approach

Professional fees incurred on the renewal of a short lease with the owner's consent are capital but are likely to be small; in which event you may allow them on de minimis grounds. Circumstances where the amounts may be material and where you should contend, in appropriate cases, that the expenditure is of a capital nature include those where:

• the new lease is for a long term (say, a period which exceeds, or may at the lessee's option exceed, 50 years), or
• there are provisions in the lease for the payment of a premium (or for equivalent capital outlay by the lessee). In practice the disallowance may be limited to a proportion of the expenses of renewal appropriate to the premium etc.

As regards the cost to the lessor of granting a lease, see PIM2205.

Fees in connection with proceedings under the Landlord and Tenant Act 1954 may include:

• the costs of resisting ejection from the premises,
• obtaining a new lease in face of opposition by the landlord, or
• securing compensation under the Act.

Such expenses stem from the landlord's refusal to renew the lease and you should not regard them as an admissible deduction.