VAT on service charge

VAT on service charge

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Our landlord (a tax exile) has elected not to recover VAT on the rent, but (as I have only recently discovered) his managing agents (UK company) charge VAT on the service charge, although this is not shown on the invoice. Can we recover the VAT?

Tony Brett

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By Martin Telfer
31st May 2007 08:39

Service charge treatment generally follows rent
If the service charges arise from a requirement of your lease then HMRC regard them as supplied by your managing agent as agent for your landlord. The VAT treatment then follows the VAT treatment of the rent. If your landlord has not opted to waive the exemption from tax then the rent, and thus the service charge, are exempt from VAT. The non-recoverable VAT is then an expense, which itself would be treated as recoverable from the tenants. It isn't a VAT charge to the tenants and so you would not be entitled to a VAT invoice [unless the landlord is registered for other supplies??] and the VAT that is recharged is not recoverable.

If your landlord is VAT registered then you should find the managing agent's invoice for service charges has your landlord's VAT number on it.

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