For accounting periods ending on or before 21 September 2001
there were two accounting treatments within UK GAAP. Some
businesses recognised no income during the rent free period. Other
businesses spread the total income receivable under the lease over
the whole period of the lease. The tax treatment should follow the
accountancy treatment.
For accounting periods ending on or after 22 September
2001
For accounting periods ending on or after 22 September 2001
UITF28 made the spreading method mandatory for accountancy
purposes. For tax purposes the spreading method
must be followed. Where a business moves from the
'no recognition' method to the spreading method the implementation
of the abstract may involve complex accounting entries. Revenue
Accountants will give advice on how to deal with these for tax
purposes.
Where a property is sold during the rent free period the
precise tax consequences will depend on the exact terms of the sale
agreement. This is because the accountancy treatment may not agree
with the capital/revenue split of the sale proceeds for tax
purposes.
