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VAT
VAT
Land and buildings, such as freehold sales, leasing or renting, are normally exempt from Value Added Tax (VAT). (For VAT purposes, the definition of “land” includes buildings.)
It is possible to opt to tax a commercial property for VAT, in which case VAT would be added to the rent(s) and any VAT on allowable management expenses reclaimable.
It is not compulsory to opt to tax a commercial property for VAT, but if you do then you would have to keep proper accounting records to satisfy compliance with HMRC. Once registered, it is only possible to deregister after you have owned the property for at least 20 years. If you sell the property then the buyer can deregister if he wants.
Regardless of any VAT registration threshold (based on turnover), some types businesses are unable to recover part or all VAT on their business expenditure: for example, banks, betting offices, funeral directors. If you have a property let to a bank, it is generally better to not opt to tax the property because the tenant would otherwise not be able to recover all the VAT, which means the property would be more expensive to lease.
Residential property is normally exempt from VAT so if for example there is a flat above the shop but the whole of the property is let to the shop tenant then the landlord would have to apportion the amount of rent attributable to the flat and not charge VAT on that amount.
You can find out more about opting to tax land and buildings by visiting HMRC website
Land and buildings, such as freehold sales, leasing or renting, are normally exempt from Value Added Tax (VAT). (For VAT purposes, the definition of “land” includes buildings.)
It is possible to opt to tax a commercial property for VAT, in which case VAT would be added to the rent(s) and any VAT on allowable management expenses reclaimable.
It is not compulsory to opt to tax a commercial property for VAT, but if you do then you would have to keep proper accounting records to satisfy compliance with HMRC. Once registered, it is only possible to deregister after you have owned the property for at least 20 years. If you sell the property then the buyer can deregister if he wants.
Regardless of any VAT registration threshold (based on turnover), some types businesses are unable to recover part or all VAT on their business expenditure: for example, banks, betting offices, funeral directors. If you have a property let to a bank, it is generally better to not opt to tax the property because the tenant would otherwise not be able to recover all the VAT, which means the property would be more expensive to lease.
Residential property is normally exempt from VAT so if for example there is a flat above the shop but the whole of the property is let to the shop tenant then the landlord would have to apportion the amount of rent attributable to the flat and not charge VAT on that amount.
You can find out more about opting to tax land and buildings by visiting HMRC website