Cases - Mrs Janine Ingram v Church Commissioners for England

Record details

Name

Mrs Janine Ingram v Church Commissioners for England

Date

[2015]

Citation

UKUT 495

Legislation

Value Added Tax 1994

Keywords

Service charges – VAT – whether VAT on service provided by a managing agent to landlord recoverable as service charges – Value Added Tax Act 1994

Summary

The appellant long lessee challenged the inclusion within the service charge demands of certain items of VAT. The First-Tier Tribunal determined that the relevant items were recoverable. The issue on appeal was whether the relevant items of VAT included in the service charges fell within an extra statutory concession set out in VAT Notice 48 paragraph 3.18 ('the Concession')and therefore should not have been included in the service charges.

The Concession exempts all mandatory service charges paid by the occupiers of residential property towards the upkeep of the flats and buildings and towards the provision of a warden, caretakers and people performing a similar function for the occupants.

In dismissing the appeal the Upper Tribunal held:

1. Mandatory service charges paid by a residential occupier to the landlord which were in the nature of rent, being directly related to the tenant’s right of occupation, are exempt from VAT by virtue of s.31 and Schedule 9, Part II Group 1 of the Value Added Tax Act 1994 and it was not necessary to rely on the Concession.
2. Mandatory service charges paid by a residential occupier that were not in the nature of rent because they were owed to a person who did not supply any accommodation fell within the Concession and were therefore exempt from VAT provided they were paid 'towards the upkeep of the dwellings or block of flats in which they resided and towards the provision of a warden, caretakers and people performing a similar function for those occupants' but not otherwise.
3. The Concession did not apply to optional services supplied by a landlord, managing agent or anyone else to a residential occupier.
4. The Concession did not apply to any charges paid by the landlord (or other person levying the service charge) to third parties for the supply of services even though the cost of those services was passed on to a residential occupier through a service charge.

Accordingly, where a lessor employed staff directly and passed the cost onto the lessees through the service charge, no VAT was payable on those salaries. Yet, where the same staff were employed by a managing agent who invoiced the lessor for those services, VAT was payable on the salaries, which was passed onto the lessees through the service charge.