The following Tax practice note Produced in partnership with Martin Scammell provides comprehensive and up to date legal information covering:
This Practice Note is about the VAT issues to consider on the grant of a lease or under an ongoing lease. These include:
whether VAT is chargeable
when it is chargeable
the tenant’s VAT recovery position
payment of rent
payment of landlord’s costs by the tenant
variations to the lease
tenant default, and
what VAT provisions should be included in the lease
For the VAT issues to be considered when a lease is assigned or terminated (including by surrender), see Practice Note: VAT issues for lease assignments and terminations.
If the landlord has opted to tax, VAT will be chargeable unless:
the option is disapplied because of the type of property or its intended use (see Practice Note: Option to tax—disapplication for residential and other property)
the option is disapplied under anti-avoidance rules (see Practice Note: Option to tax—disapplication under anti-avoidance rules), or
the lease can be treated as a VAT-free transfer of a going concern—this might be relevant if the lease is for a premium, such that there is little value remaining in the landlord's interest in the land (see Practice Note: Transfers of a going concern involving land and buildings)
If the landlord has not opted to tax, the lease will be exempt from VAT unless:
the property is such that mandatory standard-rating applies (see Practice Note: Exclusions from the exemption from
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