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HMRC internal manual

Business Income Manual

Specific deductions: professional fees: renewal of leases

Practical approach

Professional fees incurred on the renewal of a short lease with the owner’s consent are capital but are likely to be small; in which event you may allow them on de minimis grounds. Circumstances where the amounts may be larger and where you should contend, in appropriate cases, that the expenditure is of a capital nature include those where:

  • the new lease is for a long term (say, a period which exceeds, or may at the lessee’s option exceed, 50 years), or
  • there are provisions in the lease for the payment of a premium (or for equivalent capital outlay by the lessee). In practice, the disallowance may be limited to a proportion of the expenses of renewal appropriate to the premium etc.

As regards the cost to the lessor of granting a lease, see PIM2205.

Fees in connection with legal proceedings in connection with leases may include:

  • the costs of resisting ejection from the premises,
  • obtaining a new lease in face of opposition by the landlord, or
  • securing statutory compensation.

Such expenses stem from the landlord’s refusal to renew the lease and you should not regard them as an admissible deduction.