HMRC change their practice on VAT treatment of lease variations

HMRC has today published Revenue & Customs Brief 11 of 2020 (RCB), concerning the VAT treatment of lease variations.  The RCB represents a change in the way HMRC have treated lease variations for VAT purposes where the landlord reduces the rent and the tenant agrees to give up or vary their break right.  Although HMRC assert that there has been no change in policy, many landlords will be pleased to see that the RCB heralds a more sensible approach.  The RCB is being issued in response to the frequency of lease variations as result of the impact of COVID-19 on the commercial property sector, particularly for retail tenants.

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