If you are a landlord of a commercial premises or are negotiating a new tenancy, it is important to be aware that due to the rising trend in lease inducement payments, the IRD will be making some changes to the way commercial landlords and tenants can treat such payments.
Lease inducement payments include rent-free periods and contributions towards fit-out costs. From 1 April 2013 these lease inducement payments will become taxable income to a recipient and tax deductible expenditure to a payer and will be spread evenly over the term of the lease.
This new tax treatment will also apply to other lease related payments including lease surrender payments made on or after 1 April 2013.
So for those landlords and tenants who are in the midst of negotiating lease inducement payments it would be advisable to commence your lease and pay or receive any lease inducement payments before 1 April 2013.
For further information or if you require assistance in preparing a new lease please contact one of our commercial property solicitors.