Hi - I'm working at a clients site today and he had a VAT visit yesterday (not a full Audit, jsut a visit as he's claiming a £7k VAT refund and they don't believe him).
The VAT Inspector picked up a couple of things (as expected), but one of them was in our favour, and that was the VAT element of the Rent Deposit whcih is shown on the Completion Statement for the units he has just moved to, and she said if we can get a VAT invoice from the Landlords for the Deposit then we can claim the VAT element back.
So, my Client rang the landlords (large multi national company) and got a really snotty lady who wouldn't help him at all, and said they don't issue VAT invoices for the deposit as the money is held in an account and then refunded when the lease is terminated. My client agreed with her that he would have to repay the VAT element at the end of the lease if he was to claim it back at this point, but she still wouldn't budge on issuing an invoice simply brushing him off by saying 'this is how we do it....'
Has anyone else been in this situation? Or got any suggestuions please?
I've come across this a few times. My understanding is that a rent deposit isn't consideration for a supply and, as it doesn't create a tax point (see section 14.2.3 of VAT Notice 700), the landlord is correct in saying that they can't issue a VAT invoice. In essence, your client hasn't paid, say, three months rent plus VAT, they've paid a deposit equivalent to three months rent plus VAT.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
