14.2.1 Tax implications for the landlord

The landlord will normally be treated as incurring a capital expense on the basis that the payment is being made to improve his freehold or superior leasehold interest (Tucker v Granada Motorway Services Ltd). Accordingly, the payment is not deductible against the landlord’s rental profits.

Will the landlord be entitled to a deduction in calculating any subsequent CGT liability? The answer depends on whether any enhancement effected by the payment is still reflected in the property at the date of disposal. This will not always be the case.

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