VAT commercial rent

[Pmcg001]

Hi, being an novice I’m looking to see if anyone could give me a quick, simple answer...

I have a limited company registered for vat, within the Company is one commercial property which is registered for VAT and as such the tenant pays vat.
If I was to purchase another property which is not registered for vat, would I have to pay VAT out of the rent already paid?
Hope I’ve explained that clearly?


Thanks

 

[SJain]

Hi PMCG, as far as i am aware, Rent is always VAT exempt (however you can choose to be a VAT registered landlord and charge VAT on commercial rent, provided you inform you tenants in advance so they can claim VAT back from HMRC, which is not attractive if your tenants are VAT exempt businesses e.g. food, children clothing, charities, doctor). As a general accounting rule, VAT is not meant to financially benefit the business - if you pay vat you claim it back from HMRC.

You have a 2nd question "another property being VAT reg" - it is a complex partially exempt and partially vat registered business territory - best answered by a professional.

All the best

 

[Pmcg001]

Thank you for your quick reply, just can’t seem to get my head around some of this. Think I will take your advice and speak to a specialist 1 to 1 thank you

 

[Scalloway]

If the 2nd property has not been opted to tax when you buy it then you can opt to charge VAT on rent in the future. The form is below.

https://www.gov.uk/government/publi...n-option-to-tax-land-andor-buildings-vat1614a

Opting to tax may make sense as you will be able to recover all your input tax. However it will make the rent unattractive to a non registered tenant. Or you could reduce the rent.

 

[rach88]

To answer your question, if you were to buy such a building, and you did nothing, then no VAT would be payable on the rent. However you would not be able to recover VAT on any of your expenses which relate to this second building. You would need to do a partial exemption calculation each time you submitted a VAT return.

So, as Scalloway says, it might be worthwhile for you to register the second building for VAT (opt to tax). Then you would charge VAT on top of the current rent and be able to recover the VAT on your expenses. However, this would make the building unattractive to a tenant who is not themselves VAT registered. These tend to include very small businesses and also doctors/financial institutions who are not allowed to be VAT registered.

Get professional advice before opting to tax as (after the cooling off period) you can only de-register after 20 years have passed.