Preparing and serving a dilapidations schedule

The issue of Value Added Tax (VAT) and dilapidations claims is complex. As no goods or services have been exchanged VAT is not usually payable on a dilapidations settlement (see HM Customs and Excise notice 742, paragraph 10.10). However, VAT can form part of the damages incurred (for a discussion on this see Appendix F of the Dilapidations guidance note (7th edition). Surveyors should respect any request for the expenditure to be recorded within financial accounts, and in many instances this will take the form of a ‘non-VAT’ invoice.

The flow chart below provides a simplified assessment of situations in which VAT can and cannot form part of a dilapidations claim.