VATLP24830 - Option to tax anti-avoidance - funding and financing: other payments or transfers from tenant to owner - funding or not?: use of lease agreement to acquire finance
A developer may use an agreement to lease or a fully signed up lease as the basis for securing a loan to finance the development of a building. »Ê¹ÚÌåÓýapp lease will indicate the levels of rent to be paid and serves as a guarantee of the levels of income to be generated from the completed building. »Ê¹ÚÌåÓýapp tenant, although he has committed himself to the levels of rental payments, is not considered to be providing a guarantee in relation to the developer’s loan.
»Ê¹ÚÌåÓýapprefore, a tenant who simply signs up to a lease before or during the course of a development is not responsible for financing the owner’s development of the land.