Letting of property

This section provides information on the Value-Added Tax (VAT) treatment of letting property from 1 July 2008, with the exception of lettings covered by transitional measures for a waiver of exemption.

Letting property is a service and includes leasing and letting. It does not include supplies of freehold equivalent interests. Lettings are exempt from VAT.

However, a landlord may opt to tax a letting except where:

  • the property is used for residential purposes
  • the letting is to a connected party, unless the tenant is entitled to deduct at least 90% of the tax chargeable on the rent.

Premiums paid between landlords and tenants, or to third parties, are taxable in certain circumstances. A premium is a sum payable in connection with the granting, surrendering, or the assignment of a lease.

Further guidance contains more detailed information on the VAT treatment of lettings.

For information in relation to the letting of accommodation for use as ‘emergency’ accommodation, please see further guidance 'Supplies of emergency accommodation and ancillary services'.