Landlords may face an extra 'layer of accounting' following a European court ruling on VAT on rental properties. The ruling, if upheld, will require tenants to pay VAT for property services such as cleaning. At the moment, VAT is only payable on service charges if it is also charged on the rent. Advisers Mazars warn that, for some landlords, this could mean they 'may find themselves becoming liable to VAT registration for the first time, which brings its own compliance headaches', according to Stacy Eden, head of property and construction. He added: 'Landlords will suffer as they are faced with an additional layer of accounting.' As for tenants, it will also bring bad news for them as service charges rise from 15% to 17.5% in the new year. But Eden said the change could benefit VAT-registered businesses. He said: 'VAT-registered businesses that have historically been paying exempt service charges may be able to benefit from a one-off windfall VAT recovery.' There are, however, 'strict time limits for the submission of claims to HMRC and therefore businesses are strongly urged to review their tax positions at the earliest opportunity'.