Ask an expert: VAT on rent and service charges

Question

A VAT registered tenant leases a commercial property from a property investment company (i.e. the landlord). The landlord employs a VAT-registered managing agent to administer rent collection and maintenance on the buildings. The lease costs are paid by the tenant to the landlord and are exempt from VAT. The managing agent’s costs are not exempt from VAT.

The managing agent charges the landlord his agent’s fees plus VAT who in turn shares these costs among his tenants. When other costs such as property maintenance cleaning and insurances are incurred they are charged by the landlord to the tenants proportionately at each tenant’s relevant share (as there are a number of properties in the block all owned and managed by the landlord and managed by the agent). These additional costs are...