Chartered Accountants Tax News - 2nd November 2009

Mon, Nov 2, 2009

In the brief HMRC state that the case confirms the UK's current VAT treatment of service charges which is that where the service charge arises as a condition under a lease and is to be provided by the lessor (or his agent) without the lessee having a choice, then the rent and service charge are treated as consideration for a single supply.

In the Tellmer case the ECJ agreed with the Czech authorities that cleaning services provided in this instance could be separated from the property rental as a separate taxable supply. However the HMRC Brief states that the Tellmer case can be distinguished because the tenants in the Czech Republic had a real option whether to ask their landlord to perform the cleaning of the common parts for additional consideration or to obtain those services themselves from a third party.

In the UK if there is a requirement for service charges to be paid but the services are provided by a different person to the lessor (or his agent) or they do not arise as a condition under the lease agreement, then HMRC's policy is that like the Tellmer case, these services are a separate supply from the lease. However, in some circumstances HMRC will treat them as exempt by concession.

Full details are available here

 

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