Commentary

V16.1051 Applying the correct VAT liability on residential domestic service charges

Part V16 Forms and other HMRC material

V16.1051 Applying the correct VAT liability on residential domestic service charges

V16.1051 Applying the correct VAT liability on residential domestic service charges

Information Sheet 7/18, September 2018

1 Overview

This information sheet, together with Revenue and Customs Brief 6 (2018) (RCB/6/18, Division V16.3), addresses the incorrect application of Extra Statutory Concession (ESC) 3.18 VAT: exemption for all domestic service charges. You also need to read the updated section 12 of Land and property (VAT Notice 742 (Part V8)) if you are:

  1.  

    —     a property management company

  2.  

    —     a housing association

  3.  

    —     a developer

  4.  

    —     a property owner

  5.  

    —     a landlord

  6.  

    —     offering similar services connected with residential dwellings

You should take action from 1 November 2018 (see Revenue and Customs Brief 6 (2018) (RCB/6/18, Division V16.3)) to ensure that you:

  1.  

    —     correctly apply the ESC 3.18

  2.  

    —     pay the right amount of VAT to HMRC

  3.  

    —     recover the right amount of VAT incurred on costs and overheads

2 Background

2.1 ESC 3.18 VAT: exemption for all domestic service charges

Customs and Excise Brief 03/94 introduced this concession in April 1994. Its purpose is to enable the same VAT treatment on mandatory service charges to a freehold occupant as to a leaseholder or tenant living on the same common estate. Such charges are:

  1.  

    —     exempt from VAT when made to leaseholders or tenants as they directly link to an exempt supply of an interest in land from the landlord

  2.  

    —     standard-rated for VAT when made to freeholders as they constitute a separate supply not linked to a supply of an interest in land

If

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