Andrew Needham looks at the VAT position of service charges on commercial property.
It is common for leases between landlords and tenants to give details of what services the landlord shall provide and what the tenants shall pay for the upkeep of the building as a whole. The lease may provide for an inclusive rental, or it may require the tenants to contribute by means of an additional charge to the basic rent. These charges are generally referred to as service charges, maintenance charges or additional rent.
The services provided may include:
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repairs and maintenance to the building;
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the management of the building;
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provision of concierge and warden; and
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insurance.
Are these charges liable to VAT?
The normal position is that
