The Gazette 1982

GAZETTE

APRIL 1982

is not registered for V.A.T. purposes, and refuses to

accept liability for the amount of the tax chargeable on

the granting of the Lease.

The out-and-out fixture does not really present a dif-

ficulty in that the Revenue Commissioners are prepared

to accept that same is part of the building, and that its

supply on foot of the Lease should only attract tax at

the lower rate.

An item which is clearly only in the nature of a fur-

nishing will, if it is dealt with under the Lease and is

deemed to add to the letting value, activate the forego-

ing provision, thereby rendering the entire transaction

chargeable with the higher rate of tax applicable to it.

Realistically, however, such a case should be avoided by

dealing with the furnishing item separately from the

Lease.

More difficult terrain is met when one is faced with

the granting of a Lease for, say, thirty-five years at an

initial inclusive yearly rent of £10,000 (reviewable at five

year intervals) where the Lessor provides, within the

terms of the demise, items which could be deemed to be

fixtures (viz. part of the immovable goods) or fur-

nishings - depending, perhaps, on whose behalf you

are arguing. If we assume such Lease to have a capital

value for V.A.T. purposes of £62,100, then the tax will

be £1,863 as per (z) above, provided that it is established

that the items in question are fixtures. If not, it would

seem that the higher rate of tax will be payable, which is

bad enough in itself, but begs the further question as to

whether same is to be applied to the full amount of the

relevant figure (as the Revenue Commissioners will very

likely contend) or to a proportion thereof. Taking the

respective higher and lower rates to be 25% and 15%,

and assuming the capital value of the rent to remain

static at £62,100, the following divergencies could

emerge on the granting of the foregoing Lease: -

If the items are established as fixtures, the taxable

element of £12,420 will as heretofore, provide a

V.A.T. liability of -

(£12,420 x 15%) -

£1,863

If the higher rate is to be applied to the full capital

value, the charge will amount to -

(£62,100 x 25%) -

£15,525

If the higher rate is to be applied to the capital

value after allowing for the proportionate reduc-

tion therein, the V.A.T. will come to -

(£12,420 x 25%) -

£3,105

From the foregoing figures, it will be seen that, in the

V.A.T. context, it can be vital - particularly if you are

dealing with a non-registered Lessee - to ensure that

any items carried by the Lease are fixtures. The problem

areas here usually relate to carpets, sanitary and like fit-

tings and partitions, and, so far as I am aware, the

Revenue Commissioners are prepared to concede that

these are fixtures, if it can be demonstrated that they are

so adhered or attached to the land or building that their

removal would damage substantially either the items

themselves or the building or structure, to which they

have been adhered or attached.

Car-Park Licences

Lettings of areas in, say, a modern office block usual-

ly provide the Lessees with the utilisation of car-parking

accommodation. This provision is effectively part and

parcel of the Lease, and will, under ordinary cir-

cumstances, be covered by the V.A.T. charge thereon.

There is, however, another type of case, which is now

met with increasing frequency in practice - the separate

long-term Licence (possibly running coterminously with

a Lease) in respect of car spaces, where same is express-

ed not to confer any estate or like interest and provides

only limited exclusivity. So far as I am aware, the of-

ficial view is that this type of transaction attracts a

V.A.T. liability - always, of course, assuming that the

relevant criteria apply.

Management

Fees charged for property and/or project manage-

ment are themselves

prima facie

within the scope of

V.A.T. This consideration leads us into the somewhat

difficult territory of service charges. Here, leaving the

question of fees aside, the main problem pertains to the

employment of personnel in the provision of the ser-

vices. Different theories have been propounded. It is ap-

parently accepted that the element of the charge at-

tributable to wages paid by an owner, who manages his

own property, will not attract a V.A.T. charge.

However, the opposite position may well obtain with

regard to such part of the ultimate charge as reflects

payments to employees of an independent manager,

particularly where the employment covers work spread

over properties in different ownerships. Ordinarily, the

constituents of a service charge, apart from those

referrable to management fees and personnel engage-

ment, will, I understand, be ignored for V.A.T. pur-

poses, unless the party providing the services enters

claims for input credits in their regard.

Registration

I do not propose to deal here on a general basis with

the above topic, but it is, perhaps, worth mentioning

that registration in respect of specific activities may be

available to parties (as, for example, pension funds)

who would not otherwise be within the scope of V.A.T.

This can be a helpful measure in financing, joint-

venture and other similar operations. Indeed in kindred

cases there may be a requirement (as opposed to a

choice) to register as where, for example, because of the

structuring of a project, the involvement of the financ-

ing institution is, or equates to, that of owner.

Also in certain types of transactions it may be advan-

tageous to give some thought to the possibility of effec-

ting Group Registrations.

Minor Development

Comparatively minor development may be ignored for

V.A.T. purposes, notwithstanding that a tax credit or

deduction may have been claimed in respect of the

outlay thereon. This concession is applied basically

where there is no essential change in the use of the pro-

perty, and provided that the outlay in question does not

exceed 10% of the total amount on which tax would be

chargeable if the work (represented by such outlay) were