Lump sum or rent-free period?

The Problem
You are taking a lease and require a rent-free period, but your landlord offers a lump sum instead. The landlord claims that you won’t need to pay tax on the payment. Is he right?

The Law
Up until March 1999 your landlord probably was right. However, in last year’s budget the Chancellor stated that reverse premiums were subject to tax in the tenant’s hands.

The Solution
If you prefer a rent-free period then there may be little or no tax benefit in accepting a lump sum in lieu. Therefore, negotiate with your landlord for either a rental holiday or a lower rent in the early part of the lease term.