The following Tax guidance note Produced in partnership with Martin Scammell provides comprehensive and up to date legal information covering:
On the grant of a lease, you will need to consider:
whether VAT is chargeable
when it might be chargeable
service charges and other payments
what VAT provisions should be included in the lease, and
the treatment of incentives offered to the tenant
Note that VAT does not generally distinguish between rent and a lease premium. A reference to a lease being chargeable to, or exempt from, VAT therefore applies both to any premium and any ongoing payments of rent.
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)VATA 1994, Sch 10, Pt 1, paras 5–11
the option is disapplied under anti-avoidance rules (see Practice Note: Option to tax—disapplication under anti-avoidance rules), orVATA 1994, Sch 10, Pt 1, paras 12–17
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)Value Added Tax (Special Provisions) Order 1995, SI 1995/1268, art 5Robinson Family v HMRC  UKFTT 360 (TC)VTOGC6250
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 VAT for land and buildings)VATA 1994, Sch 9, Pt II, group 1
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