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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