Dilapidations & Financial Reporting Standards 102 (FRS102) – A Guide For Occupiers

What are Dilapidations?

Dilapidations are works often occur at the end of a commercial lease, dependent on the exact lease terms. These often stipulate how a property should be returned to the Landlord and typically include repair, reinstatement and redecoration, among other aspects.

In most cases this results in a financial settlement between the landlord and the tenant, which can result in a big reduction in profits for the occupier in the year that the lease ends. In some cases an upcoming dilapidations bill may even prevent a business from vacating a premises.

How does FRS102 apply to Dilapidations?

Companies may not be aware that they are able to save on their corporation tax bill.

Under financial reporting standards 102 (FRS102), dilapidations liabilities may be recorded in accounts as a ‘liability’ and can therefore be deductible from Corporation Tax calculations over the life of the lease.

This avoids the large ‘one-off’ bill previously mentioned in accordance with Section 21: Provisions and Contingencies of the FRS 102 and can has the added benefit of effective financial planning for a business.

Benefits of a FRS102 Dilapidations Liability Assessment?

• Improved cash flow to enable accurate budgeting and business planning.

• Reduced annual Corporation Tax payments during the lifecycle of the lease.

• Pre-determined dilapidations cost at the end of the lease term to reduce cashflow risks.

How Space Building Surveyors Can Help?

Its imperative that the dilapidations liability is accurately assessed and Chartered Building Surveyors have these skills. Space Building Surveyors have longstanding experience in dealing with lease end dilapidations for both landlords and tenants. We also have experience in preparing compliant dilapidations assessments in line with FRS 102 in formats easily interpreted by accountants.

If you wish to find out more contact Space Building Surveyors at admin@spacebuildingsurveyors.com