Value Added Tax (VAT)
- Few landlords will need to countenance VAT as they are unlikely to be liable to register.
- VAT can be complex.
- VAT is not chargeable on residential rents.
- VAT may be chargeable on commercial rents.
- VAT may be chargeable on fees not part of rents.
- Where vat is chargeable under TPO rules this should be shown as Plus VAT in any amounts chargeable.
- If fees-turnover exceeds the prevailing threshold of circa £77k pa in 2013 then the whole amount is subject to VAT.
- Zero-rate VAT is applicable to residential rents in the UK.
- Zero-rate VAT is also the vat rate applicable to any admin fees where an agency fees-turnover is below circa £77k pa.
- VAT becomes more complex when the agent or landlord is a shop owner who has elected within say a month of exchange of contracts to take advantage of the recovery of vat on the purchase. The downside is that VAT must be charged on rents related to such purchase.
- This is in contrast to a neighbouring shop where there is no vat on the property in which case none is chargeable to the commercial tenants.
- There are positive and negative consequences of VAT .
- If agents and landlords are vat registered they can recover any applicable vat charged. The down side is that they will be at a commercial disadvantage since they will be somewhat less competitive on fees than their unregistered competitors, who would not be obliged to charge vat to tenant customers and landlord clients.
Published: 11 November 2013
Last Updated: 17 November 2021