Q&A: VAT on lease terminations and property dilapidations

In this week’s Q&A, Croner Taxwise VAT adviser Tony Chamberlain, considers the treatment of VAT on lease terminations and property dilapidations in commercial buildings

My client is the landlord of a commercial building. The building is opted to tax and they charge VAT on their rents to a third party tenant. The lease has two years remaining, but the tenant wishes to leave and so is paying a fee to my client to terminate the lease early. They are also making a payment to my client in respect of property dilapidations. Will my client have to account for VAT on either of these payments?

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