NOTE ON THE APPORTIONMENT OF RENT UNDER OCCUPATIONAL LEASES AND THE VAT TREATMENT THEREOF

October 20, 2015

When selling a property that is subject to Occupational Leases, it is necessary to consider the apportionment of rent due under those leases. Unless completion corresponds with the last day of a rent payment period, the Seller will therefore have received rent , for a period which extends beyond the completion date.

Therefore, on completion the Seller may have to make a payment to the Buyer in respect of the rent received for the period from and including the completion date.

The question arises as to what VAT treatment should be made in respect of this element of apportionment.

The tenants under the Occupational Leases will usually have been required to pay their annual rent by four equal quarterly instalments in advance (usually but not always on the Northern Ireland quarter days which are 1 February, 1 May, 1 August and 1 November in every year).

If there is VAT payable on the occupational rents, the Seller will have sent VAT invoices to its tenants and will have to account for that VAT to HMRC for the whole quarter. The Buyer is not therefore entitled to any VAT element of the rent. Therefore the payment of the apportioned amount of the rent is outside the scope of VAT.

This note is for information purposes and is not intended to be relied upon. Should any advice be required in respect of a particular transaction, then please contact p.cronin@cfrlaw.co.uk