Updated HMRC Guidance on Lease Rent Holidays - Pension Scheme Properties

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09 April, 2020

The ongoing COVID-19 pandemic is having an impact across all areas of our lives, including within the context of commercial property. The unprecedented and unpredictable nature of the situation also means that parties are having to make swift decisions in order to protect themselves in the long term. For Pension Scheme trustees and administrators dealing with properties let by the Scheme to a connected party, one such decision is whether a rent holiday can be granted to the Tenant due to the economic impact of the COVID-19 outbreak, exacerbated by the nationwide lockdown.

As the lease has been entered into between connected parties, the rules as to how a rent holiday can be permitted are set by HMRC. In normal circumstances, HMRC would expect an independent valuation to be obtained from a qualified surveyor confirming that the agreed rent holiday is on commercial terms. However, clearly we are not in normal times and HMRC have had to reconsider their approach given the situation on the ground.

Happily, HMRC have recently released guidance specifically on this point, confirming that "any arm's length commercial decisions… including rent holidays, will not give rise to an unauthorised payment charge and can be agreed without independent valuations taking place." Although a valuation may not therefore be required, it should still be noted that any decision made should be on an "arm's length" basis so Scheme administrators may wish to request evidence to support the decision made, such as requesting details of the tenant's financial position. HMRC have advised that this updated position will apply until June 2020, at which point further guidance should be issued.

Should you require any advice or assistance with commercial leases, particularly in light of the current circumstances, get in touch with a member of the Commercial Property team at Forbes.

For more information contact Mohassan Mehmood in our Commercial Property department via email or phone on 0333 207 1161. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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