Speed Read: Common forms of inducement to tenants to take a new lease include rent-free periods, reverse premiums and contributions to tenant fit-out costs. A tenant is subject to direct tax on the inducement (either by a tax charge or a loss of tax deductions). For the landlord, any inducement payment will normally be capital in nature. VAT will not be due in respect of inducement payments to a tenant that does nothing more than agree to enter into a lease. The direct tax and VAT treatment can differ where the tenant provides services to the landlord in connection with the inducement.