Good morning all, and what a wonderful sunny morning it is as well.
I have a client who has just leased a warehouse unit that comes with offices, he is thinking of subletting one of the offices out (I am considering renting it myself but that will be another post completely) he has checked that he is allowed to do this with the landlord who has confirmed that it is fine, he will be paying VAT on the rental of approximately £1600 annually.
I just wanted to check that I am treating the sublet correctly from a VAT point of view
Option 1, he could opt to tax the sublet which would mean charging 20% on top of the rent which will be paid to HMRC as output tax but he would be able to reclaim all of the input tax.
Option 2, he could rent out the office without charging VAT but this would be an exempt supply and would mean that his business would become partially exempt and he would be unable to reclaim all of the input tax on the rent only the portion used for taxable supplies, however the exempt amount should fall within De Minimis and the simplified test 2 which would mean that the whole of the input tax could be recovered.
Also the office will be supplied with power, broadband and use of kitchen and shower, would this be classed as being a supply of more than just office space but in fact providing a 'service' which would mean Standard Rating, if this was the case am I right in thinking that no option to tax would be needed.
Just wondered if anyone could confirm if my thinking is correct or if not kindly shove me in the right direction.
Any help and advice appreciated as always, Cheers.
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Doug
These are only my opinions of how I see things and therefore should not be taken as advice
Doug
the provision of power and broadband, and even access to a shared kitchen will not turn the rent to a wider provision of services. I would suggest that the provision of a shower is a separate taxable service.
There is some HMRC guidance on this issue, but it is pretty unclear, and will not help you reach a decision! Best start in Notice 742, chapter 2.
Doug the provision of power and broadband, and even access to a shared kitchen will not turn the rent to a wider provision of services. I would suggest that the provision of a shower is a separate taxable service. There is some HMRC guidance on this issue, but it is pretty unclear, and will not help you reach a decision! Best start in Notice 742, chapter 2.
Hi Les, thanks for the reply
Yes guidance is a bit vague but I am quite happy that it will be treated as an exempt supply unless he opts to tax which in this case there will be no benefit for it would have no effect on the claim to recover input tax as it will fall comfortably within the De Minimis limits.
It was just when I started thinking about the provision of services that made me ask the question of whether it should all be treated as taxable, I am pretty sure the shower is not needed to be included in the agreement but as you say it could be treated as a S/R supply if needed.
Thanks again
__________________
Doug
These are only my opinions of how I see things and therefore should not be taken as advice
