Commercial Lease confusion: states Tenant pays VAT on rent AND that rent excludes VAT

[sparrow0616]

Looking to rent a small office. Contract states that VAT and interest is payable as rent; that all sums payable are exclusive of VAT and specifically that Rent paid the landlord is excluded from VAT. So, do I have to pay VAT?

 

[Newchodge]

Looking to rent a small office. Contract states that VAT and interest is payable as rent; that all sums payable are exclusive of VAT and specifically that Rent paid the landlord is excluded from VAT. So, do I have to pay VAT?

Ask the landlord.

 

[fisicx]

Or let your solicitor ask the question along with all the other questionable clauses in the lease.

 

[nelioneil]

Ask your solicitor for clarification.

Generally the landlord can only charge VAT for the commercial premises if they are vat registered and have opted to tax.

 

[Talktime]

Based on the clauses you have described, the contract appears internally inconsistent. One clause states that VAT is payable as rent and that all sums are exclusive of VAT, implying VAT may be chargeable. Yet another clause states that rent is excluded from VAT, which suggests the opposite.


Under Schedule 9 of the Value Added Tax Act 1994, rent from commercial property is exempt from VAT unless the landlord has opted to tax under Schedule 10. If the landlord has opted, VAT is chargeable and must be paid. If not, rent remains exempt.


You should request written confirmation from the landlord as to whether he has opted to tax the property. If he has, VAT is due. If not, VAT should not be added. Until clarified, you are entitled to rely on the clause stating that rent is excluded from VAT. If needed, I can draft a letter seeking clarification and protecting your position.

 

[Bobbo]

Would be easier to answer this if you provide the wording of all relevant clauses verbatim. Typically a commercial lease would state that amounts are exclusive of VAT whether or not there was an intention to charge VAT - in case the property was opted to tax later on by the landlord.

As others have said the obvious person to ask here is the landlord you are renting from.