The taxpayer CCML was a management company linked to a property known as Chelsea Cloisters. CCML supplied management services to leaseholders with an interest in the property. HMRC contacted the directors who advised that the fees had been treated as exempt from VAT on the basis of extra statutory concession (ESC) 3.18 as explained in Customs Notice 48.
The property included commercial space and residential apartments as well as communal areas. The fees were charged on a breakeven basis including a contribution to a sinking fund. In some cases the freeholder also took over leases and became the leaseholder.
HMRC concluded that some of the fees were standard rated and CCML had to file a return for the period 1 November 2018 to 30 April 2023 which showed an amount due of £970 183. HMRC’s view was that ESC 3.18 only applied...
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