ABSTRACT
The question of Value Added Tax (VAT) for service charges is at present governed by the Finance Act 1989 which, with effect from August of that year, introduced a new set of rules and regulations pertaining to property generally. The application of VAT to service charges depends on whether the landlord or owner has "elected to waive exemptions to tax", i.e. has chosen the option to tax. Clearly, goods and services supplied to the building will be subject to VAT, and that VAT must be paid. If the landlord does not opt to tax the building, however, this is irrelevant for service charge purposes; it is the gross figure which is important. Under this option, the tenants who are registered for VAT are unable to seek VAT invoices from the landlords and are thus unable to recover their input tax. Subsequent administration of VAT is largely one of accounting practice, in which most companies are well versed.
