Property Company & VAT

[ash799]

Hi Everyone, i have set up a property investment limited company, the inital cash injection is in the form of a loan to purchase commercial property and rent out.
Once i reach the threhsold of receving rental income of 90k per year (not now but maybe in the long future), Do i have to register for VAT?

 

[Lisa Thomas]

Do you have an accountant? Recommend you run this by them. If not, and you can't find one on here, dm me for a recommendation.

 

[Scalloway]

In general you only need to register commercial property for VAT if you wish to. You need to consult an accountant to see if it is beneficial.

 

[David Griffiths]

VAT and commercial property is a hugely complex area, and with the sums likely to be involved getting things wrong can be very expensive indeed.

It would be advisable to consult a professional who has experience in this field. Relying on advice from random unknown people on an internet forum would be lunacy

 

[Gyumri]

Once i reach the threhsold of receving rental income of 90k per year (not now but maybe in the long future), Do i have to register for VAT?

There is no vat on rent - it's an exempt supply. However, if you don't charge vat on rent you cannot recover any input vat on whatever expenses the company is incurring.

So if you want to recover input vat then you need to apply to HMRC to "Opt to Tax" - but then you would need to charge tenants vat on your rental invoices which might or might not matter to tenants depending on whether they are vat registered.

As @David Griffiths has said you are best to get an accountant to do the spade work.

 

[LPB 123]

There is no vat on rent - it's an exempt supply. However, if you don't charge vat on rent you cannot recover any input vat on whatever expenses the company is incurring.

OP is buying a commercial property so it's not exempt?

 

[Gyumri]

OP is buying a commercial property so it's not exempt?

Rent is exempt from the vat scheme - look up on the internet. If the expenses of the company are only confined to utility bills etc which charge 5% vat then the input vat may not be worth claiming - in which case there is no point in 'opting to tax' the building because then the OP would have to register for vat and charge vat on the rent to his tenants.

Should I be registered for VAT? - UK Landlord Tax

If you are only letting out non-holiday residential property and you only have PAYE income and/or investment income you cannot register for VAT. Is VAT charged on rental income in the UK? Income from residential property except furnished holiday lettings is exempt from VAT. Income on commercial...

uklandlordtax.co.uk

 

[LPB 123]

Any commercial property we have rented has always been subject to VAT.

 

[Scalloway]

Any commercial property we have rented has always been subject to VAT.

The owner will have opted to apply VAT. There is no obligation to do this but generally it makes sense as the landlord and tenant can reclaim VAT.

 

[LPB 123]

Okay sorry for any confusion caused to the OP and thank you for your correction.

 

[JonWhite_Adler]

Hi Everyone, i have set up a property investment limited company, the inital cash injection is in the form of a loan to purchase commercial property and rent out.
Once i reach the threhsold of receving rental income of 90k per year (not now but maybe in the long future), Do i have to register for VAT?

Hi Ash,

VAT in proeprty is a very difficult question and as stated above you don't have to elect a property for VAT.

The reason landlords do elect a property for VAT is to be able to recover VAT on costs (maintenance, utilities etc) that you have to pay for on the building. However, if you a letting a proeprty on a FRI (Full Repairing and Insuring) Lease then you will have no costs to cover and will not need to elect for VAT.

If the property is multiple leases and you retain responsibility for maintenance of common parts, some utilities and cleaning etc then you will likely want to elect it for VAT.

In some cases the decision will be taken from you becasue the previous owner has elected the property for VAT and it is easier to leave it then un-elect for VAT.

Jon

 

[ash799]

Thank you everybody for your input really appreciate all your input.
JonWhite Thank you for simplifying the answer, appreciate it mate.
As mentioned by most of you, Property and VAT is complex so the services of a accountant is essential.

If any of you can recommend an accountant that specialises in Commercial Property, your suggestions would be much appreciated.
Thank You

 

[Lisa Thomas]

Thank you everybody for your input really appreciate all your input.
JonWhite Thank you for simplifying the answer, appreciate it mate.
As mentioned by most of you, Property and VAT is complex so the services of a accountant is essential.

If any of you can recommend an accountant that specialises in Commercial Property, your suggestions would be much appreciated.
Thank You

DM me for a recommendation if you don't find someone on here.

 

[JonWhite_Adler]

Ash, find accountant local to you. If you can't DM me and happy to share my accouants details, they are an established firm and will have someone who can advise you.