EXEMPT PROPERTIES

The Council has commercial buildings where parts are rented to third parties. Some of the properties are not opted to tax and therefore exempt from VAT. Rent, insurance costs, service charges are invoiced as exempt, however a query has been raised about VAT treatment when recharging ‘additional services’ as the Council receives invoices from contractors and utility providers with VAT (not water).

Leaseholders only occupy and use part of these Council buildings and these VATable costs relate to entire Council buildings so a percentage is calculated based on their occupancy.

The question is should all these additional costs be charged as exempt or subject to VAT. Examples below -

 

Supply of Gas

Supply of Electricity

Water rates

 

Gas Testing

Legionella Testing

Electrical Testing: fixed-wire only

WC and Hygiene services

Maintenance (inc window cleaning)

Repairs and improvements

Parents
  • The general principles are:


    - Charges covering services in communal areas, unmetered utility recharges, and charges for services which the tenant is obliged to take from the landlord under the terms of the lease – generally deemed further consideration for the lease and follow the VAT liability of the rent.


    - Metered utility charges and services within the specific areas occupied exclusively by the tenant, the tenant would generally be able to make direct arrangements with any supplier. Therefore, if the tenant chooses to receive the supply from the landlord, the VAT liability of the charge will be the normal liability of the separate services being supplied.


    Section 11 of HMRC's notice 742 provides useful more detailed guidance.
    www.gov.uk/.../vat-on-land-and-property-notice-742

Reply
  • The general principles are:


    - Charges covering services in communal areas, unmetered utility recharges, and charges for services which the tenant is obliged to take from the landlord under the terms of the lease – generally deemed further consideration for the lease and follow the VAT liability of the rent.


    - Metered utility charges and services within the specific areas occupied exclusively by the tenant, the tenant would generally be able to make direct arrangements with any supplier. Therefore, if the tenant chooses to receive the supply from the landlord, the VAT liability of the charge will be the normal liability of the separate services being supplied.


    Section 11 of HMRC's notice 742 provides useful more detailed guidance.
    www.gov.uk/.../vat-on-land-and-property-notice-742

Children