8 October 2021

VAT treatment of dilapidation payments: Elizabeth Small writes for Taxation

Tax Partner, Elizabeth Small’s article entitled ‘VAT treatment of dilapidation payments’ was published in Taxation.

Her article covers the following key points:

  • During or at the end of a tenancy the landlord may serve a terminal schedule of dilapidations on the tenant.
  • HMRC used to see the dilapidations payment as damages and not subject to VAT.
  • Revenue and Customs Brief 12/20 suggested that dilapidations would be liable to VAT.
  • Since then, HMRC has revised its guidance a number of times and now we are back to the position, in most cases, that businesses can continue to treat such payments as not subject to VAT, but this rule may not be applied ubiquitously and proper analysis is required.

In this article, it is assumed that the property is used purely for commercial purposes and has been opted for VAT purposes.

Read the full article here.

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