Service charges (also referred to as maintenance charges or additional rent) paid by tenants in addition to the basic rent are a frequent source of confusion.

Charges which are due from tenants to their landlord fall into two categories:

1Compulsory charges, for e.g maintenance, upkeep of common areas or concierges etc, are treated for VAT purposes as part of the rent and follow its VAT liability, i.e. exempt as regards dwellings, but either exempt or, if opted, standard-rated as regards commercial buildings.

The reason for this is that, because it is compulsory, the charge is additional consideration paid by the tenant for their right over the land.

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