Both sides signed this agreement. The seller repaid the payment to the buyer because he now had to make the payment to another party within his group and the buyer duly refunded the agreed amount to the other member of the group. No one noticed that VAT should be levied, and the seller continued to conclude the agreement on the basis of the figure indicated. This means that, in the context of leases in which a termination clause of a tenancy agreement is exercised, there is always an exempt VAT delivery (unless the tax option has been exercised by the party receiving the payment), whether or not the amount of the break tax is provided for in the lease. For example, if the tenant pays the break fee, he is subject to VAT if the lessor opted for the tax (which would have previously been outside the scope of VAT if it was considered to be compensation that was one of the conditions of the granting of the original lease). This common feature of leases in newly developed buildings is something that may unexpectedly surprise the owner/developer as well as the tenant from RCT`s point of view. Similarly, the agreement of a tenant to carry out work for the lessor on the property, or a payment made either by the lessor or the tenant for the modification of the tenancy agreement or the surrender of the tenancy agreement, may give rise to an SDLT liability. This is a complex area, so please contact your local BDO VAT for more information. We do not believe that this change in policy affects the situation in which a tenant pays an amount in relation to forfeiture (for example. B to restore a property in a condition compatible with the obligation of repair in the lease). We are still of the opinion that the tenant is considered compensation for breach of his repair contract. Therefore, the payment should be considered outside the scope of VAT.
There is then the additional problem that, even if VAT is not payable, if you take the lease at first, it could be due for the duration of the rental agreement, since the owner may decide to levy VAT on the property at any time. For example, if a landlord and tenant agree to a six-month rent-free period in exchange for the tenant who agrees to extend the lease by six months, or agrees to carry out certain work on the property or to remove a break-up clause, it may be an exchange with VAT effect. For more advice and how we can help, please contact one of the contacts below. If you are a tenant and you are thinking of a rental agreement, call our sales team on 01623 468 468, as we will be happy to help you respond to your requests. If the lease agreement includes a construction contract in which the tenant undertakes to carry out all the equipment work for the lessor/developer, the tenant is, with regard to his contract with his owner, a principal contractor with respect to the work equipped for the purposes of RCT.