Real Estate things you once knew but may have forgotten - VAT and car parking

The question of VAT on leases or licences of car parking spaces continues to cause problems on a regular basis.

The usual presumption in relation to VAT and commercial property is that unless the option to tax has been exercised in respect of a building, VAT will not be chargeable in relation to rent payable under a lease or licence to occupy any part of that building.

Leases or licences of residential premises are usually exempt so that no VAT is payable.

What is the position with regard to car parking? The answer is that this is standard rated. It does not matter that the spaces exist in a car park on a non elected commercial property site nor that the car parking licence is granted to a house owner ancillary to the use of the house. In either case VAT is payable on the rent or licence fee.

There is an exception however. If the lease of the car parking facilities is connected to the lease granted to the same tenant of, say, office space in the commercial building (say for example the landlord prefers to lease separately the car parking spaces at a separate rent) then VAT will only be chargeable if the option to tax has been exercised. Similarly if a landlord grants separate leases of a flat and ancillary car parking spaces to the same tenant then VAT will not be payable on the car park rent in the same way as it is not payable on the rent of the flat.

For further information please contact Leilah Rawle on +44 (0)20 7367 3032 or at leilah.rawle@cms-cmck.com or on Mike Boutell +44(0)20 7367 2218 or at mike.boutell@cms-cmck.com