On 7 September 2018, HMRC published Revenue and Customs Brief 6 (2018), which explains when Extra Statutory Concession 3.18 VAT exemption for all domestic service charges will be applied.

The purpose of the concession is to allow the same VAT treatment of service charges paid by residential leaseholders and freeholders for the same common services on the same common estate. As the charge is directly linked to an exempt supply of an interest in land, leaseholders and tenants are not required to pay VAT on these charges. As there is no such link for freeholders, to allow the same VAT treatment, landlords may elect to use the concession to treat these supplies as exempt from VAT if the landlord is contractually obliged to provide the services.

From 1 November 2018, all property management companies, often used by landlords to obtain goods and services on the landlords’ behalf and charge a taxable management fee for providing the service, will need to correctly account for VAT.

A copy of the Brief can be viewed here.