- If the landlord subsequently disposes of the property, or takes occupation, he is treated as having received a capital receipt. The payment is compensation for the landlord being required to take back his property in a dilapidated condition;
- If the landlord lets the property out again, the payment is “likely to have the effect of filling a hole in the landlord’s profits” and reflects the lower rent that will have to be charged. In short, it is compensation for lost profits and is taxed as income;
- However, if the landlord himself carries out the repairs and the tenant’s payment is a contribution towards those costs, the landlord can obtain a revenue deduction, on the net cost.
More information on this can be found here
There is useful information you can find in this article here
I hope this is helpful and answers your question.
If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.