The disapplication of the option to tax under the development financier rules is potentially problematic for landlords and tenants in situations where exempt (or partially exempt) tenants agree to carry out landlord’s works or request extensive modifications to the landlord’s base build works. As it is in neither the landlord’s or the tenant’s interests to disapply the landlord’s option to tax, both parties should work together to mitigate the risk of that happening, for example by restructuring the tenant incentive arrangements, so that the landlord can fund any development costs identified as creating a disapplication risk. Parties may wish to consider other ways of mitigating the risk, such as by taking advantage of the HMRC non-statutory clearance process and/or by taking out tax risk insurance.
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The disapplication of the option to tax under the development financier rules is potentially problematic for landlords and tenants in situations where exempt (or partially exempt) tenants agree to carry out landlord’s works or request extensive modifications to the landlord’s base build works. As it is in neither the landlord’s or the tenant’s interests to disapply the landlord’s option to tax, both parties should work together to mitigate the risk of that happening, for example by restructuring the tenant incentive arrangements, so that the landlord can fund any development costs identified as creating a disapplication risk. Parties may wish to consider other ways of mitigating the risk, such as by taking advantage of the HMRC non-statutory clearance process and/or by taking out tax risk insurance.
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