Hi, I have a client who has a shop. In the back of his shop is a room that he rents out to various alternative health practitioners on an hour/retainer basis. I belive that as he rents this out with no additional services (the room is within reason theyr to do with as they choose) there is no need to charge to VAT. Am i correct? Thank you
I believe this is something he elects to do or not. If he has 'opted to tax' then yes he must charge VAT on rent and can reclaim input VAT on expenditure in relation to that room. If he has not opted to tax then no, he doesn't need to charge VAT, but equally cannot reclaim input VAT on related expenditure.
I dont think you can opt to tax part of a building. I think its all or nothing. There are some very strict rules surrounding this and it is not something that is decided quickly. lots of planning usually goes into this.
what I would say is who owns the shop? your client or a landlord?
If a landlord owns it, then perhaps look to see if your client pays VAT on their rent.
If he is sub letting and VAT registered, then I would think he would need to charge VAT but if he owns the freehold then it would depend on whether he has opted to pay VAT or not. Not gospel though.
Since 1989 there has been a rule that after 20 years the option to tax could be revoked (and hence it is only recently that advantage of thus could be taken)...guess who went on a VAT Update CPD course recently!
