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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4972
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am in the process of surrender of a lease from a tenant.

Resolved Question:

I am in the process of surrender of a lease from a tenant. There are also some dilapidations to be carried out and the tenant would prefer to provide a sum of money for these works. How do I account for this as the money will be received before the end of the tax year. It is classed as rental income since the property is owned by me personally. I will be spending the money for the works after April 5th so I need to offset it against the money from before April 5th. I know I can carry a loss forward but not backwards.
Guidance much appreciated
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

please clarify for me
Are you receiving a payment in advance for repairs to the property?

Many thanks


Customer: replied 3 years ago.

Yes in theory the process of surrender including payment for dilapidations will be effective before April 5th.

Expert:  taxadvisor.uk replied 3 years ago.
Thank you for your reply...

This is what I would recommend to my clients -
Surrender of a lease and any payment for it should be accounted for in the current period as the lease is terminated and there will be no rental income beyond current accounting period unless it is relet.

Payment for dilapidations is not really income as the tenant is making good the cost of repairs. If repairs are going to be carried out after 5 Apr 2014 then applying the accounting concept of matching income to expenses you should reflect this element as a payment in advance and show both the expenses and the contribution towards them as a transaction in the coming period (after 5 Apr).

I hope this is helpful and answers your question.


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