Spring 2005 Newsletter Content Home Sweet Pension Anything To Declare? Death And Taxes His And Hers Oh, Gross! We Didn't Mean It Agassi Wins Time To Go It Could Be Worse... Trivial Pursuit Re: Mortgages A Marriage Made In... Time's Money Show Business Scam Of The Decade? Gift Aid Vat's Hot! Wait For It A Good Buy? Know Your Articles Rights And Wrongs

Oh, Gross! Commercial leases often share some of the commercial risks and rewards of the property between the landlord and the tenant - the rent goes up if the tenant does well, and it goes down if not. For example, a retailer's rent might have an element that varies with sales. This is so common that it's surprising to see a case go to court to argue what the words mean. Debenhams had a lease which specified a variable rent based on the 'total amount of gross sales'. For some time, they worked this out on the money going through the tills - gross receipts. Then someone realised that receipts had VAT in them. They argued with the landlord that 'sales' ought to be only Debenhams' money - and the landlord argued back that 'gross' meant gross, or VAT-inclusive. It ended up in the High Court. The judge found for the tenant. He reckoned that the purpose of the clause was to share the risks of income going up and down. If the Government put the VAT rate up, the retailer might find receipts went up but income went down - because more of the receipts would have to go to the VATman. So the landlord's version would not have the right effect - the rent would go up, even though the tenant was doing worse. 'Sales' are also always exclusive of VAT for accounting purposes. 'Gross sales' means before taking off expenses, but after taking off VAT. If you have this sort of lease, either as landlord or as tenant, it's worth having a look at what it says, and a look at what you do, to see if you agree with the judge. The case is Debenhams Retail plc v Sun Alliance and London Assurance Co Ltd. The tenant had been paying rent at the higher figure for some time while disputing it, and presumably is now entitled to a refund for past periods.