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HMRC internal manual

VAT Land and Property

Exemption: examples of supplies which are leasing or letting of immovable property

The following table provides examples of supplies that are likely to fall within the land exemption. The examples illustrate how the criteria described are applied in everyday situations. Whilst some of the examples described may involve contractual arrangements that actually constitute leases, for ease the terms ‘licensee’, ‘licence’ and ‘licence to occupy land’ are used throughout. The examples do not override any supplies of land that are specifically excluded from the exemption for land, for example hire of sporting facilities and letting of holiday accommodation.

The provision of Further information
office accommodation in return for a monthly rent, with the right to use shared areas such as reception, lifts, tea points and rest rooms. The predominant supply is the right to occupy defined office accommodation and exclude others. The fact that the licensee may have to share other parts of the building does not affect the occupational rights granted by the licence.
a specified area of office space less than a complete floor or room, such as a bank of desks in return for a periodic licence fee. A licence to occupy land can be granted in respect of parts of rooms and floors and consequently can exist within an open plan office area. The key point is that there has to be an identifiable area of land that the licensee has an exclusive right to occupy during the period of the licence or the times specified in the licence.
specified areas of office space for periods of time that are not continuous, such as company A occupies a room each morning whilst company B occupies the same room every afternoon. Both A and B pay a separate licence fee. Occupation does not have to be continuous. In this example both A and B have licences for the same areas of land but for different times. They both have been granted occupational rights in respect of the land and, as the licences do not temporally overlap, each company has a separate licence to occupy land.
specified areas of storage space within a building, such as a room, cupboard or marked area for which someone is granted exclusive use. For example, the provision of space in a self storage establishment, (does not include the provision of storage space within a movable unit, such as a steel shipping container). The space allocated must be specified in the licence agreement. The customer is normally the only person with access to the goods. Please note, this was the position prior to 1 October 2012. See table at VATLP06100 and VATLP17500 for further details about supplies of storage.
a catering concession where the caterer is granted a licence to occupy a specific kitchen and restaurant area. The licensee is able to operate his catering business from the specified areas of land covered by the licence. The licensee is granted the appropriate occupational rights, is able to exclude others and exploit the land for the purpose of the licence.
a catering concession where the caterer is granted a licence to occupy a specific kitchen area and then sells the food off the premises. The kitchen area is defined and the caterer has an exclusive right of occupation. As with the above example, the licensee is able to operate his business from the area of land covered by the licence.
the right to run a landfill site to an operator from a specified area of land. In addition, allowing a farmer the right to graze his animals from the restored grassy areas of the site. Even though there is some overlap in the areas occupied by the landfill site operator and the farmer, both have a licence to occupy land. The presence of the farmer on the land does not impinge upon the landfill site operator’s occupational right and vice versa. The landfill site operator has a licence to occupy land for the purpose of disposing of waste whilst the farmer has a licence that allows him to occupy the grassy areas for grazing his animals.
a right to occupy a field (containing a public right of way) to a farmer for the purpose of grazing his livestock. The right of the public to cross the field does not prevent the farmer from using the field for its designated purpose. His occupational rights are not compromised by the presence of other people on the land.
Note: The provision of grazing rights can normally be categorised as both a licence to occupy (Group 1, Schedule 9) and a supply of grass/food (Group 1, Schedule 8). Consequently, as zero rating takes precedence over any exemption, such rights are normally zero rated. For further guidance on grazing rights see VFOOD    
  Or hiring out Further information
  a hall or other accommodation for meetings, parties, etc (including use of kitchen area, lighting, furniture, etc). Most supplies of hiring out such accommodation will constitute a licence to occupy land. Access to kitchens, toilets, car parking and normal items of furniture is incidental to the predominant supply of land. However, if other services, such as catering, are provided the supply is likely to be a standard rated supply of services. See table at VATLP06100 for further details.