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taxadvisor.uk, Chartered Certified Accountant
Category: UK Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hello, My question is do Leasehold Improvements qualify for

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Hello, My question is do Leasehold Improvements qualify for Annual Investment Allowance? The Commercial Property Rental Lease is for five years. If they do not qualify for AIA, what Capital allowances would be applicable if any? Thank you, CAS

Hello and welcome to the site. Thank you for your question.

Please clarify nature of improvements and money value of expenditure.

Many thanks

Customer: replied 3 years ago.

Hi Tax Advisor, a bit more background info- my client has a new five year lease. In addition to the rental payments there is a contribution towards 'Fit out work' of £400 each quarter. My client has replied that this was to change the internal layout of the offices to create a 'training room'. He delivers sales training workshops & seminars.The extra cost is for just one year - therefore £1600. Would you categorise this as something other than Leasehold Improvements? Thanks, CAS

Customer: replied 3 years ago.

My client has provided me with the following additional info: "Re fit out. They subdivided the office to create a training room and yes I am liable for dilapidations" - I hope this is helpful to you helping me! Thanks.

Rona, thank you for your quick reply.

The total expenditure is £1,600 covering some changes to internal layout of the offices to create training room.

In light of the level of expense and materiality of it, I would not regard this as leasehold improvements and seriously consider writing off the whole amount as repairs and renewals. Your client could change his mind and not use it for the purpose designed as a training room, the whole cost would be a write off. I would write off the cost in the year of spend.

if you were to capitalise the cost, then claim AIA within the broad heading of plant and machinery.

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.

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