Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Costs definition

What does Costs mean? In litigation, costs are the legal fees, disbursements, court fees and VAT incurred in bringing, defending or appealing a claim, and the sums a court or tribunal may order one party to pay another for those liabilities. The concept is governed by procedural rules and case law rather than a single statutory definition: England and Wales (CPR 44–47), Northern Ireland (RCJ Ord 62), Scotland (where the equivalent term is expenses), and Ireland (Legal Services Regulation Act 2015 and the Legal Costs Adjudicators). The general approach is broadly consistent, subject to local terminology and procedure. Typical features include the discretionary rule...

VAT on residential service charges: landlords’ supplies, HMRC concession (management/commonhold/RTM/factors), sinking funds, utilities, water, insurance, optional services and holiday accommodation

Published by a LexisNexis Tax expert

Practice notes

This Practice Note outlines VAT treatment of residential service charges.

Service charges payable to landlords

Where a lease or licence requires the occupier to pay service charges to the landlord, they are treated in the same way as the rent for VAT purposes. The reason is that there is no distinct supply: rent and service charges together constitute the consideration for granting serviced accommodation. In effect, both elements amount to a single payment for a letting. Consequently, service charges linked to residential property are normally exempt. The tenant therefore bears no VAT, while the landlord cannot reclaim VAT on associated expenditure. By contrast, service charges connected to holiday accommodation will normally be subject to VAT on the same basis as the rent (see Practice Notes: Exclusions from the exemption from VAT for land and buildings—Hotel and similar accommodation, and Exclusions from the exemption from VAT for land and buildings—Holiday accommodation)...

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Martin Scammell

Martin Scammell is an independent VAT consultant, specialising in property and construction matters, who works with tax departments in major corporates and universities, and with a number of law and accountancy firms. He is the author of the leading reference work on VAT and property.Martin started out in VAT Policy in Customs & Excise, was a Partner at Ernst & Young, where he headed up the VAT real estate group, and then became head of indirect tax at Eversheds.He has been involved in the development of VAT legislation and policy over many years, and regularly serves on working parties established by HMRC. He was a member of the Office of Tax Simplification’s consultative committee for their review of VAT in 2017, and in 2018-19 of HMRC’s external stakeholder group considering the proposed reverse charge for building work. Martin currently works with HMRC as...

Web page updated on 21/05/2026

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