VAT And Service Charges

A current European case is examining whether the provision of services by a landlord to tenants is a VAT-able supply even if the landlord does not charge VAT on the rent.

Before entering into a new lease of commercial premises, the prospective tenant will always want to know, and his lawyers will enquire as part of the pre-contract due diligence process, whether the landlord has "opted to tax" the property – namely, whether it has elected to charge VAT on the rents payable under the lease it is proposing to grant. This includes not only the "principal" rent, but also any other sums which are reserved as "rent" in the lease and this will usually include the sum that has to be paid to the landlord as service charge.