In the brief HMRC state that the case confirms the UK's current VAT treatment of service charges which is that where the service charge arises as a condition under a lease and is to be provided by the lessor (or his agent) without the lessee having a choice, then the rent and service charge are treated as consideration for a single supply.

In the Tellmer case the ECJ agreed with the Czech authorities that cleaning services provided in this instance could be separated from the property rental as a separate taxable supply. However the HMRC Brief states that the Tellmer case can be distinguished because the tenants in the Czech Republic had a real option whether to ask their landlord to perform the cleaning of the common parts for additional consideration or to obtain those services themselves from a third party.

In the UK if there is a requirement for service charges to be paid but the services are provided by a different person to the lessor (or his agent) or they do not arise as a condition under the lease agreement, then HMRC's policy is that like the Tellmer case, these services are a separate supply from the lease. However, in some circumstances HMRC will treat them as exempt by concession.

The brief is available below at 2.09.