CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. HMRC Clarifies VAT Treatment Of Property Service Charges

HMRC Clarifies VAT Treatment Of Property Service Charges

by Robin Pilgrim, LawAndTax-News.com, London

02 November 2009


HM Revenue and Customs (HMRC), the UK tax authority, has announced that the UK's current treatment of property service changes for the purposes of value-added tax (VAT) is unchanged following a European Court of Justice (ECJ) decision.

The issue relates to the Tellmer case, which was brought before the ECJ to determine whether the leasing of apartments and the related cleaning of the common parts of the apartment building formed a single exempt supply by the landlord.

In this case, the landlord, named Tellmer, argued against the Czech authorities that the cleaning services amounted to a separate taxable supply. The ECJ agreed that in the circumstances outlined in the Tellmer case, the cleaning services could be separated from the property rental as a separate taxable supply.

In reaching its judgment, the ECJ concluded that two separate supplies were made rather than a single indivisible supply, because the tenants in the Czech Republic were not required to clean the common parts of the property, but had an option to ask their landlord to perform the cleaning of the common areas for an additional payment, or to obtain those services themselves from a third party.

In a brief issued on October 27, HMRC stated that if there is a requirement for service charges to be paid but the services are either 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 "continues to be that these services are a separate supply from the lease".

However, under certain circumstances, they can be treated as exempt by concession, the department stated.

"It is clear from the decision of the ECJ that Tellmer itself provided both the property leasing and the cleaning services to the tenants. However, the tenants had the choice of making an independent contract with a third party to provide the cleaning services. In the particular circumstances the court did not consider that the cleaning services were ancillary to the property letting and, as a result, concluded that they constituted a separate supply," the brief explained.

"On this basis, since the UK only treats leasing of property and related service charges as a single supply, where the services are provided by the lessor (or his agent) as a condition under the lease agreement, HMRC considers that the findings in Tellmer are consistent with existing UK policy," the brief concluded.


To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »