Rent as "licence fee"

Lumen

Our company rents a room in a serviced office building.

The rent is charged as a "licence fee" on which VAT is charged. This essentially covers space, furniture, heat and electric. There are other line items for telephone, broadband, meeting room hire etc.

Prior to a recent change in building management, our rent was charged as a "licence fee" with VAT "not applicable".

This all seems a bit funny to me.

Questions:

1. Is this legit?
2. Should I be bothered? We just reclaim any VAT charged.

dbran

Hi

The issue of whether or not VAT is charged on the lease or if it it is exempt depends on what it says in the lease that you signed with them. They cannot simply change it in a unilateral fashion as you suggest.

dbran

Marcusm

Rent is charged on a lease of property. One of the conditions for a lease to exist is that you have exclusive use of the identified property. Where you have a contract to be provided with 25sq m (e.g) of space in a serviced office without a requirement that it be a specifically identified part of the property, it is appropriate to describe what you have as a licence rather than a lease. Whether the grant of a licence is regarded as a transaction involving the letting of immovable property has to be determined by reference to all the facts including hte ancillary services - whether just telephones or fully serviced including secretarial services.

I agree with dbran that it cannot simply be changed on a whim; however, is it possible that there has been a reassessment of the appropriate classification of the transaction? The only person who will know is your counterparty. It doe snot surprise me that they have begun to operate VAT but that is not to say that it is correct.