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HMRC internal manual

VAT Time of supply

Tax points for specific types of supply: land and property: leases and tenancies

Long leases and tenancies

The supply of a lease or tenancy exceeding 21 years is regarded as a major interest in land and is therefore treated as a supply of goods under paragraph 4 of Schedule 4 to the VAT Act 1994. Regulation 85 of the VAT Regulations 1995 (see VATTOS2335) applies where rents, or other payments due under the terms of such a lease or tenancy, are payable periodically or from time to time. A tax point is created in these circumstances by the earlier of the receipt of payment or the issue of a VAT invoice. There is no basic tax point - but see VATTOS9375 in cases where there is a delay in issuing a VAT invoice or payment of the rent beyond one year. Application of regulation 85 is not governed by the amounts payable during the course of the lease. In other words it applies both in the case of significant periodical rental payments and in circumstances where a premium is payable at the outset followed only by periodic peppercorn rents.

Short-term leases

Supplies such as short-term leases and licences to occupy that fall short of a major interest in land, are treated as supplies of services. In most cases they represent a continuous supply of services for time of supply purposes (see VATTOS9150). Consequently a tax point is normally only created by the issue of a VAT invoice or receipt of payment.