HMRC internal manual

VAT Land and Property

Exemption: European concept of 'leasing or letting of immovable property': what is a leasing or letting of immovable property?

The meaning of ‘leasing or letting of immovable property’ (Article 135 (1) (l) of the Principal VAT Directive) has been firmly established in numerous ECJ judgements.

Essentially, a ‘leasing or letting of immovable property’ is ‘normally a relatively passive activity, not generating any significant added value’ (Goed Wonen C-326/99). The ECJ has also described it as the ‘passive provision of space’ (Sinclair Collis C-275/01).

To be classified as a ‘leasing or letting of immovable property’, a transaction must have all of the following characteristics:

1 It must relate to a defined area (VATLP05750) of immovable property (VATLP05740)
2 It must confer a right to occupy that property, which gives the tenant or licensee the right to exclude others and to occupy as owner (VATLP05760)
3 The right of occupation must be for an agreed duration (VATLP05770)
4 That right must be given for a payment for the period (VATLP05780)