A. The supply by a landlord of accepting the surrender of a lease upon payment from a tenant is known as a reverse surrender and is seen as a grant of an interest in, or right over, land (VAT Act 1994 Schedule 9 Group 1 Note 1). Such a supply is exempt from VAT unless the person making the supply has opted to tax the property in which case it is standard rated.
In your client’s case therefore, it depends on whether the payment for the reverse surrender was received before or after the option to tax was put in place as this will determine whether it is an exempt or a standard rated supply. If the payment was received before your client opted to tax the payment is exempt from VAT but if the payment was received after he had opted to tax it is standard rated.
If you have a query on VAT and land and property, why not contact the VAT Advice Line on 0844 892 2470 to discuss it. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
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