For UK landlords, management companies, maintenance trust companies (MTCs) and residential estates, the First-tier Tribunal decision in Places For People Homes Ltd v HMRC [2025] UKFTT 1417 (TC) has major implications.
It provides long-awaited clarity on how VAT applies to service charges, trust-based maintenance arrangements, and onsite staffing costs: all areas where HMRC scrutiny has increased sharply since 2018.
About the case
The Tribunal considered whether MTCs – entities commonly used in older residential developments to collect and administer service charges – were:
- making exempt supplies of land-related services to lessees; or
- making standard-rated supplies of maintenance services to the landlord, as HMRC argued.
The case also examined:
- whether MTCs’ services could form part of a single exempt composite supply with the landlord’s grant of a lease; and
- whether onsite staff wages could qualify as VAT-free disbursements.
The decision provides one of the clearest judicial statements to date on HMRC’s approach to residential service charges following Revenue & Customs Brief 6 (2018).
The Tribunal’s findings
1. Supplies are made to the landlord, not the lessees
Although lessees paid contributions into maintenance funds, the Tribunal held that the economic reality was decisive.
Because the landlord retained ownership of the structure and common parts, the maintenance services primarily benefited the landlord.
Result: MTCs make taxable supplies to the landlord, not exempt supplies to occupiers.
2. No composite supply with the landlord’s exempt lease
The Tribunal confirmed that supplies from different suppliers cannot be merged into a single exempt supply. This means that the landlord’s exempt grant of a residential lease cannot absorb the MTC’s taxable maintenance services.
This is a critical clarification for anyone seeking to treat service charges as exempt by reference to lease arrangements.
3. Onsite staff costs are not disbursements
The Tribunal applied strict principles: to be a disbursement, a cost must be incurred as agent for the principal.
Because MTCs employed staff directly, and used their work to perform their own obligations, the wages were part of the MTCs’ taxable consideration, not VAT-free passthrough costs.
A similar case, Chelsea Cloisters Management v HMRC, is due to be heard at the Upper Tribunal and will address EU law aspects. Pending that decision (if the Upper Tribunal finds in favour of Chelsea Cloisters), this case backs up HMRC current policy.
How we can help
Our VAT specialists advise landlords, freeholders, resident management companies, maintenance trust companies, managing agents and property developers. We provide clear, commercially focused support on VAT liability of service charges, direction of supply, structural VAT risks, treatment of staffing costs, historic VAT review and reclaim opportunities, HMRC enquiries, and restructuring service-charge arrangements for compliance and efficiency.
Whether you operate one building or a national portfolio, this Tribunal decision is a timely opportunity to ensure that your VAT treatment is correct – and defensible.
Would you like to know more?
To discuss how this case affects your service charge arrangements, or to explore how we can help you strengthen your VAT position, get in touch with Maria Pozo-Riqueni or send us an enquiry.
