Question 1

New Rules on VAT

Accepted Answer

New Rules on VAT Q: We read in the press an alarming note on VAT - New HMRC Rules mean that managing agents will have to charge VAT on cost of staff that managing agents themselves employ on behalf of leaseholders. In our case, this was the situation when the leaseholders took over the freehold company together with the original Managing Agents (long Gone). Since then our own company directly employs our three porters with proper contracts, although our agents do the actual salary payments on our behalf. Does this method of payment catch us? Our gardening company also charges us VAT as do almost all our suppliers, workmen etc. FPRA Hon Consultant Gordon Whelan replies: In September 2018, HMRC issued new guidance on the application of VAT to residential service charges. The guidance clarified HMRC’s position when a landlord is contractually required to provide services to the occupant of a property and uses a property management company to provide those services. The guidance was considered necessary because managing agents were not charging VAT on site staff costs. The justification for this was reliance on an Extra Statutory Concession (ESC3.18) which exempted VAT on domestic service charges paid by the occupants of residential property towards the upkeep of the block of flats in which they reside and towards the provision of wardens and caretakers. The revised guidance made clear that this exemption only applies when the services are provided by the freeholder. It does not extend to circumstances when the services are provided by a managing agent or a Residents’ Management Company (RMC). From the details provided it appears that you are affected by this guidance and that the employment of the three porters is subject to VAT at the standard rate of 20 per cent. VAT is a complex tax and the correct advice will depend on the exact circumstances of the company. You should discuss your position with your accountant to determine the best way forward for the company. [Submitted May 2019]

Question 2

New Rules on VAT

Accepted Answer

New Rules on VAT Q: We read in the press an alarming note on VAT - New HMRC Rules mean that managing agents will have to charge VAT on cost of staff that managing agents themselves employ on behalf of leaseholders. In our case, this was the situation when the leaseholders took over the freehold company together with the original Managing Agents (long Gone). Since then our own company directly employs our three porters with proper contracts, although our agents do the actual salary payments on our behalf. Does this method of payment catch us? Our gardening company also charges us VAT as do almost all our suppliers, workmen etc. FPRA Hon Consultant Gordon Whelan replies: In September 2018, HMRC issued new guidance on the application of VAT to residential service charges. The guidance clarified HMRC’s position when a landlord is contractually required to provide services to the occupant of a property and uses a property management company to provide those services. The guidance was considered necessary because managing agents were not charging VAT on site staff costs. The justification for this was reliance on an Extra Statutory Concession (ESC3.18) which exempted VAT on domestic service charges paid by the occupants of residential property towards the upkeep of the block of flats in which they reside and towards the provision of wardens and caretakers. The revised guidance made clear that this exemption only applies when the services are provided by the freeholder. It does not extend to circumstances when the services are provided by a managing agent or a Residents’ Management Company (RMC). From the details provided it appears that you are affected by this guidance and that the employment of the three porters is subject to VAT at the standard rate of 20 per cent. VAT is a complex tax and the correct advice will depend on the exact circumstances of the company. You should discuss your position with your accountant to determine the best way forward for the company. [Submitted May 2019]

New Rules on VAT

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