Commentary

V4.112A Exemption—specific supplies falling within VATA 1994, Sch 9, Group 1

Part V4 Exemption, zero-rating and reduced rates

V4.112A Exemption—specific supplies falling within VATA 1994, Sch 9, Group 1

V4.112A Exemption—specific supplies falling within VATA 1994, Sch 9, Group 1

The terms 'land', 'interest in or right over land', 'licence to occupy land' and 'personal right' are described and discussed in V4.112. Set out below is the VAT treatment of certain categories of supply to which these terms apply.

Surrenders and inducements1

Surrenders/reverse surrenders

The European Court of Justice has held2 that:

'1.     The term 'letting of immovable property' used in article 13B(b) of the Sixth Directive [now art 135(1)(l) of Directive 2006/112/EC] to define an exempt transaction covers the case where a tenant surrenders his lease and returns the immovable property to his immediate landlord.

2.     Article 13B(b) [now art 135 of Directive 2006/112/EC]… which allows Member States to apply further exclusions to the scope of the exemption for the letting of immovable property, does not authorise them to tax the consideration paid by one party to the other in connection with the surrender of the lease when the rent paid under the lease was exempt from VAT.'

Consequently a 'grant', for the purpose of VATA 1994, Sch 9, Group 1, Item 1 includes an assignment or surrender and the supply made by the person to whom an interest is surrendered when there is a reverse surrender3. For these purposes, a reverse surrender is one in which the person to whom the interest is surrendered is paid by the person by whom the interest is being surrendered to accept the surrender4. A tribunal has held that a reverse surrender involves simply a supply

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