Management companies’ fees to landlords standard rated

From 1 November all property management companies must account for VAT at the standard rate on fees charged to landlords for providing common services to the occupants of residential property. They may no longer use extra-statutory concession 3.18 ‘Exemption for all domestic service charges’ under which landlords that provide such services directly may treat as exempt mandatory service charges paid by the occupants.

The concession applies only when residential leaseholders and freeholders pay a mandatory service charge for identical services on the same estate. Its purpose is to allow the same VAT treatment of these service charges for everyone living there. It is not available to companies that provide goods and services to landlords and charge a management fee.

HMRC is aware of property management and similar service companies that are not correctly accounting for VAT. It confirms that these companies cannot use the concession to:

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