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Tax – VAT

Sub-lease – TOGC?

The Tax Tribunal has found that the grant of a sub-lease by a property letting L can amount to a TOGC for VAT purposes. This is an important decision since it goes directly against HMRC’s published guidance. 

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Service charges – VAT

The VAT treatment of service charges will usually depend upon whether L has opted to tax the property. The traditional view is that if L has not opted to tax the VAT then the rent (and service charge) will be VAT-exempt (since the rent and the service charge are treated as one bundled supply). On the other hand, if L has opted to tax then VAT will be charged on the service charge. 

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Listed buildings - alterations

The current VAT zero rating for building materials and construction services supplied for approved alterations to listed residential or charitable use buildings is to be removed from 1 October.

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Conveyancing - disbursements

It is important to ensure that conveyancing disbursements (in particular, standard search fees) are disbursements, and thus VAT does not have to be charged on them to the client.

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Salary sacrifice - changes

New rules on salary sacrifice schemes come into force on 1 January 2012.

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'Compensation' - not a supply

A compensation payment will not be VATable (being regarded as damages or liquidated damages). Interestingly, it is possible for ongoing contractual payments to be regarded as 'compensation' (rather than contractual payments for the provision of services).

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New build - planning permission

Zero rating applies to the construction of new dwellings. In practice, it is vital to ensure that the planning consent is properly worded so as to ensure it is a new build - as opposed, for example, to a rebuild of an existing property. Otherwise, there will be arguments over whether it is a genuine new build (and clear evidence of the building being taken down to the foundations or slab will be needed).

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Break clause - penalty payment

Suppose a commercial T has a break clause which allows him to break the lease on payment of a penalty to L (eg three months rent). Will that penalty payment be subject to VAT (or will it be treated in the same way as the rent - and thus be VATable if it is a VAT-elected property)?

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Service charges - VATable?

Are service charges VATable?

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Disbursements - conveyancing

HMRC's view as to what is a disbursement for VAT purposes is different from that of the Law Society. In particular, HMRC puts strong emphasis on its requirement that (i) you must have acted as the agent of your client when you paid the third party, and
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