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Post Info TOPIC: VAT on residential rent
clairet


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VAT on residential rent
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Hi everyone

I've got a client who owns a pub on which an option to tax exists. He charges rent to the pub tenant and to the people renting flats upstairs. The accountant is confusing me terribly about who we should be charging rent to - my understanding is that VAT is charged on the commercial part of the building, i.e. the pub tenant pays rent plus VAT, but that residential property is exempt despite the existence of the option to tax. The accountant is insisting that we charge VAT on the residential rent as well, however. Which is correct?

Any help much appreciated! Thankyou.



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Wella


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My understanding is the same as yours but it is a bit of a minefield

This link to HMRC does state in 3.1 that even if an option to tax is taken, any part of a building used for residential purposes still remains exempt.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000158&propertyType=document#P50_3984

HTH

Bill



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clairet


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Minefield is the right word! Thanks Bill - much appreciated.

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JulieS


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Wella wrote:

My understanding is the same as yours but it is a bit of a minefield

This link to HMRC does state in 3.1 that even if an option to tax is taken, any part of a building used for residential purposes still remains exempt.

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000158&propertyType=document#P50_3984

HTH

Bill

 Learning all the time.



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leshoward


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Correct; you cannot charge VAT on residential rent.
You can only charge VAT on a commercial rent where the landlord has 'Opted to Tax.'
Also, since the income is both taxable and exempt, the Partial Exemption rules apply. Do seek advice on this, as it can affect recovery of VAT on refurbishment, legal fees, etc. Another minefield, I am afraid!

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