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HMRC internal manual

VAT Land and Property

Exemption: European concept of 'leasing or letting of immovable property': essential characteristics: the right of occupation must be given for a payment for the period

In a typical leasing or letting agreement, the consideration (eg rent) is determined by reference to the passage of time for which the property is made available. This does not mean, however, that it is unacceptable for other factors to be taken into account. In Temco C284-03, the annual rent payable was based on floor area occupied, turnover and staff employed by the licensee (paragraph 23 of ECJ judgement).

There is unlikely to be a leasing or letting if, when determining the consideration for the contract, the parties take absolutely no account of the amount of time for which the property is made available. In Commission v Ireland, C-358/97, the ‘Tolls’ case, where there was no leasing or letting, the ECJ found it significant that

‘The duration of the use of the road is not a factor taken into account by the parties, in particular in determining the price.’

To illustrate further, in Diana Bryce t/a The Barn FTC/04/2010, the taxpayer provided a barn for children’s parties, together with services such as the provision of play equipment and refreshments. The charge for a play party was determined on the basis of a fee per child (subject to a minimum charge of £100), rather than a flat fee for rental of the barn. The Chairman of the Upper Tribunal found that ‘this aspect of the transaction appears to me wholly inconsistent with a right of the customer to occupy “as if that person was the owner”’ (paragraph 44 of decision).