Can landlords benefit from recent Budget tax breaks?

It is true landlords will not benefit in the same way from changes to capital allowances, super deductions (SDs) and first-year allowances (FYAs) for two years as owner-users and tenants because of an exclusion of leased plant and machinery from the qualifying rules. However, it is clear there are some areas where landlords of certain properties may still be able to benefit.

For instance, where a landlord owns a multi-let property, there will be some common areas used by all tenants. These spaces can range from the entrance lobbies, circulation areas and toilets in an office building, to the malls, public toilets, food courts, service areas and management suites of a shopping centre.

The lobbies and common areas of private rented accommodation will also benefit from this newly announced two-year incentive, and many of these properties boast further shared facilities such as gyms, cinemas, roof terraces and car parking.

Post Covid-19, office landlords may find tenants demand a different, more flexible and attractive occupational experience.

In areas where offices are not occupied via leases, the leasing exclusion will not come into play. As a result of the pandemic, landlords may consider what lease incentives they might offer to attract potential tenants.

A contribution towards a tenant’s Cat B fit-out works is an area where the SDs and FYAs would be claimable by the landlord. When considering this against the offer of a rent-free period that provides no tax benefit and delays valuable income, you can see what the landlord might favour.

The chancellor may have missed a trick in allowing landlords the full scope of the SDs and FYAs that could have allowed them to invest in modernising office buildings to meet the challenges of post-pandemic working and climate change. However, there are still some significant benefits to be derived from this window of opportunity between April 2021 and March 2023.

Richard Steer is chairman of Gleeds Worldwide