Letting Commercial Property

When entering into a commercial lease a landlord may offer a potential tenant an incentive in order to encourage you to lease the property. In general, three forms of lease incentive are commonly used:

• Reverse premium
• Rent free period
• Contribution towards a tenant’s fit-out costs

The incentive chosen, will ultimately depend on the preferences of the landlord and tenant, as well as the individual tax statuses of the parties themselves.

Whilst, the commerciality of the transaction for both the landlord and the tenant will be a driving factor, a contribution towards a tenant’s fit-out costs could actually be a more tax efficient lease incentive.

Where the parties agree to use a contribution, care should be taken in drafting the clauses, so that the tax benefit, lies with the party which can benefit the most.

Cavetta Consulting, can advise either party of the transaction on the obtaining the best tax position. For further information on how we can assist, download the attached brochure.

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