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How do we handle VAT payments for site based staff?

Service charges explained

1. What are the changes in the VAT payments?

Here we explain what the changes are when they will apply and who they will be affecting. As well as the details over the costs involved.

Her Majesty’s Revenue and Customs (HMRC) has introduced new guidance regarding the payment of VAT for site-based staff at developments.

The guidance requires that Property Managers must add VAT to the cost of site staff collected through the development service charge from 1 November 2018.

This means that any site staff costs after this date will have a 20% VAT charge attached. This will not affect the other parts of your service charge, which already include VAT.

You can read the new guidance on the Government’s website here.

2. Why are you making these changes now?

HMRC has been very explicit in their guidance that VAT must be added to the cost of site staff from 1 November 2018. We have sought expert tax advice to understand this in greater detail and the findings have made it very clear that all managing agents, including FirstPort, must adhere to the guidance. FirstPort does not benefit financially from this tax charge.

3. Which members of staff are affected, and what is included in the revised charge?

Site staff refers to a member of staff directly employed by us connected with the day-to-day running of an estate, dwelling or block of flats. At FirstPort this includes, but is not limited to:

  • Development Managers/Assistant Development Managers
  • Concierge
  • Caretakers
  • Cleaners
  • Maintenance Operatives
  • Gardeners

So, specially included in the VAT charge are:

  • All employee payroll costs, including salary, benefits, National Insurance, and pension contributions

Not included in the VAT charge:

  • Staff training
  • Staff expenses
  • Development Manager flat costs, including Council Tax (where a Development Manager is residential)

4. What will the cost be for me personally?

This only affects developments where you pay a service charge and where there are dedicated site staff employed by FirstPort. You may live on a development where this change does not affect you directly.

If you are affected by this, your share of the VAT will depend on the lease/deeds at your development. As with all charges, your share will be as specified in your lease/deeds. The exact amount will be highlighted in your next budget or service charge accounts as follows:

  • All service charge budgets issued from 1 October 2018 onwards will show the VAT on site-based staff from 1 November 2018.
  • All service charge accounts issued for developments with financial year ends from 30 November 2018 onwards will have VAT included on site-based staff from 1 November 2018. The additional VAT charge will show as a variance from the previously notified service charge budget, as these were issued before the HMRC announcement. Any overall surplus or deficit will be added to your next invoice.

5. When will I have to pay?

The VAT will be applied from 1 November 2018 and will be added to your next service charge invoice, and clearly marked. It will be part of the total service charge amount, payable in the normal way.

6. What does the payment I currently incur for site staff cover?

Individuals and teams working at your site ensure the smooth day-to-day running of your development. For example, Development Managers keep on top of any maintenance and local issues, concierge staff welcome visitors to your development and look after deliveries, and cleaners make sure that communal areas are looking the best they can be. The number of staff required on-site is based on the size and complexity of the development.

7. Will you make any profit out of this additional charge?

This is not an additional charge made by FirstPort. It is a tax charge applied by HMRC that FirstPort collects and pays directly to HMRC. FirstPort does not benefit from this charge.