After many months the industry has been given final guidance on the application of VAT to Commercial Rent Arrears Recovery (CRAR) fees.
Confirmation has now been issued by HMRC that VAT invoices for CRAR fees should not be issued to tenants.
It has been confirmed that VAT should only be charged in transactions between a landlord (or his agent) and the Enforcement Agency. Landlords (or agents) would then reclaim the VAT from HMRC in the normal way.
This ruling has brought an end to speculation and confusion within the industry over this issue.
Going forwards, upon completion of CRAR instructions all enforcement agencies are now compelled to issue an invoice to their clients for the VAT element of any fees charged to the tenant.