BIM46420 - 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.