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VAT: Domestic service charges

Shared from Tax Insider: VAT: Domestic service charges
By Andrew Needham, October 2023

Andrew Needham looks at the VAT position of services charges on domestic property. 

A service charge is a charge made to tenants or owner occupiers (leaseholders) for the upkeep of common areas of an estate or apartment block, such as paths, driveways, communal gardens and children’s playgrounds, corridors, lifts, etc. These sums are due under the terms of the lease or tenancy agreement. 

Is VAT charged on service charges? 

The general rule is that a service charge is ‘further consideration’ for the main supply. It is therefore normally an additional payment for the main supply of a property rental or lease and is exempt from VAT. 

However, if a management company provides services to freehold owners of dwellings, the supply is taxable because there is no supply of domestic accommodation to link those services to.  


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