A landlord may make a payment to a prospective tenant to induce them to enter a lease agreement. Such payments are sometimes referred to as inducement payments or reverse premiums. The VAT treatment of an inducement payment or reverse premium depends on whether the payment is for any supply by the tenant to the landlord, and, if it is payment for a supply, the VAT treatment will be that of the supply. See Notice 742, para 10.1. This point can be illustrated by the following examples.
Example 1
A landlord makes a payment to a prospective
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