A VAT registered sole trader (only turns over 30k per year, is de-registering asap) has bought an FHL jointly with his wife in July......should they be paying VAT on the FHL income? the total turnover for both businesses will be under the VAT threshold. I know that once he has de-resgitered that they won't be paying vat on any of the business BUT will they need to pay vat on income from the FHL from July when they purchased it to the date when he becomes de-registered with his own personal business?
I think from what I have read that the FHL does not need to be VAT registered or vat paid to HMRC on the sales.
Thanks in advance for any help on this.
Rachel
Furnished Holiday Lettings
Furnished holiday lettings are considered to be a standard rated supply for VAT. This should not be an issue unless you also have other taxable supplies in the same legal capacity or the gross income is more than £83,000. So if you and your spouse were in a VAT registered business partnership and also owned the property jointly, you would have to account for VAT on the holiday letting income but you would be able to claim any input VAT on the expenses.
If however, you were a sole trader registered for VAT and you owned the property jointly with your spouse then the furnished holiday letting income is received in a different capacity so VAT should not be an issue. If you are not registered for VAT and your supplies including the holiday letting income exceeds the VAT registration threshold (currently £83,000) in any 12 month period, then you would need to register for VAT and charge VAT at 20% on your holiday rentals.
I would say no based on the bit you've highlighted in yellow (I could be wrong!) but it's interesting that if you are over the threshold taking into account FHL income then you have to pay VAT on it.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi Rachel
Are these actually two separate businesses? What does the sole trader do? I suggest its firstly just thinking about the artificial separation angle before anything else.
Then apply the usual VAT rules.
Can you add the guidance links for both of the quotes that you have included, so it can all be viewed in context? (Just saves me looking them up - Im being lazy today, well it is Saturday!)
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
