ACP SGS 7
Terms
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- What do you call offers made by a landlord designed to entice a tenant to take up a lease?
- Inducements
- What are the three most comment types of inducements?
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1. A reverse premium (L pays T);
2. A contribution to works to be carried out by the tenant;
3. A rent free period. - In determining whether an inducement will have VAT consequences, what do you need to ascertain?
- Whether there is in fact a supply being made by the tenant in return for the inducement given be the landlord.
- For the purpose of VAT and inducements, what is meant by a supply?
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1. An interest in land - note this will fall within the exemption in Schedule 9 VATA 1994 unless an option to tax has been made.
2. Services, other than an interest in land - these will be standard rated unless exempt. - Commissioners of HM Customs v Mirror Group Newspapers
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Where a tenant does nothing more in return for a payment than:
1. undertake to become a tenant; and
2. pay the rent due under the lease
this will not in itself constitute any type of supply by T to L and is therefore outside the scope of VAT. - Give three examples of standard rated supplies made by tenants in return for inducements?
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1. Carrying out building works to improve the landlord's property.
2. Carrying out works that the landlord is responsible and landlord pays.
3. Acting as anchor tenant. Inducement in return for advertising role. - Who from a VAT perspective has to account to HMRC for any VAT?
- The person making the supply, invariably the tenant.
- What will determine who meets the cost of paying VAT to HMRC?
- The cost of paying the VAT will be governed by the terms of the agreement between the parties.
- Is the grant of a rent free period or reverse premium considered to be taxable?
- The grant of either as pure inducement to the tenant agreeing to enter into the lease is NOT normally see as taxable.
- In connection with whether an inducement gives rise to standard rated VAT supply, is it relevant whether either party has opted to tax?
- No, it is irrelevant whether either party has opted to tax
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Where a tenant does nothing more in return for a payment than:
1. undertake to become a tenant; and
2. pay the rent due under the lease
this will not in itself constitute any type of supply by T to L and is therefore outside the scope of - Commissioners of HM Customs v Mirror Group Newspapers
- If a standard rated supply is found in the context of an inducement, what is a landlord likely to require if it is bound to pay VAT under the lease documentation?
- Landlord will want to make payment of any VAT conditional on receiving a valid VAT invoice.
- What documentation might you need to attach to an agreement for lease?
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1. Agreed form lease;
2. Agreed form guarantee (if any)
3. Notice(s) required re security of tenure (certified copy(ies))*
4. Declaration(s) required re security of tenure (certified copy(ies))*
5. Copies of plans
*Tenant and guarantor (if any) to provide. Also, must be carried out before the parties enter into the agreement (s. 38(1)) of the LTA 1954.