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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4764
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My Client has a Tennants works agreement in their Lease

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My Client has a Tennants works agreement in their Lease agreement to the sum of 25K. As part of the works they have installed an air conditioning unit for 10K and have Invoiced the Landlord. The Invoice has been paid by the client in 2015 accounts but the Landlord will not refund monies until 2016 accounts.
My research on this suggests that the asset sits on the Landlords balance sheet and he gets the benefit of the AIA but in order than the Tennant does not lose the benefit of the AIA for this integral feature the payment from the Landlord should go to the balance sheet rather than P&L and be released to P&L over the term of the lease.
I am trying to confirm the correct treatment in the accounts for 2015 and 2016. My thoughts are that I should prepay the 10K in 2015 accounts and deal with the asset in 2016 as outlined above . Any guidance would be gratefully received.

Hello, I am Keith one of the experts on Just Answer, and pleased to be able to help you with your question.

I am of the opinion that to apply this item as a prepayment in 2015 and bring it to account in the 2016 accounts is the proper accounting treatment for this item,

I do hope that you have found my reply, albeit brief, of assistance. You seem to have the matter well in hand in your thoughts.

Customer: replied 1 year ago.
Could you possibly confirm that the accounting treatment I have outlined for 2016 accounts is correct .

Yes, through the fixed assets in the balance sheet. Your client will then get benefit of 100% relief through the AIA albeit deferred until 2016.

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Thank you for your support.