VAT on flat above restaurant?

[michm1]

Another Q! We are in the process of buying a restaurant (freehold) it has a flat above. My brother will be the chef at said restaurant and also will be renting the flat from us.
Is there VAT payable on this rent?
Also is this the most tax efficent way of doing things? i.e we pay my brother a ful salary and then he pays us rent OR we reduce his salary accordingly so he is basically 'live-in'

Thanks in advance for any replies!

 

[Jenni384]

There is no VAT on residential rents.
Commerical rents are VAT exempt by default unless you opt to tax.

 

[michm1]

Thankyou so much!

 

[Jenni384]

You're welcome

You should speak to your accountant about which scenario will be more tax efficient for you.

 

[Merchant UK]

Another Q! We are in the process of buying a restaurant (freehold) it has a flat above. My brother will be the chef at said restaurant and also will be renting the flat from us.
Is there VAT payable on this rent?
Also is this the most tax efficent way of doing things? i.e we pay my brother a ful salary and then he pays us rent OR we reduce his salary accordingly so he is basically 'live-in'

Thanks in advance for any replies!

I think your best option is to keep the flat totally seperate from the business, and charge him the going rate for the flat, he will of course be also responsible for his council tax.

This will also be better if he decides to move out for whatever reason you will be able to rent the flat out immediately.

if you discount his rent on the flat it could be seen as payment in kind and you'll both be taxed to the hilt as a result.

If you keep the flat out of the business and rent it privately to him then, it will make things alot easier for you in the long run

 

[peterbirganza]

Its very simple and legal thing in your benefit that there is no VAT on it.

Best regards,

Peter Birganza

 

[David Griffiths]

I think your best option is to keep the flat totally seperate from the business, and charge him the going rate for the flat, he will of course be also responsible for his council tax.

This will also be better if he decides to move out for whatever reason you will be able to rent the flat out immediately.

if you discount his rent on the flat it could be seen as payment in kind and you'll both be taxed to the hilt as a result.

If you keep the flat out of the business and rent it privately to him then, it will make things alot easier for you in the long run

That might be the case, but it might not. The OP hasn't said if they are going to operate through a limited company or a partnership. If it's a limited company, we don't know if the company is going to own the property, or if the directors/shareholders are going to own it personally.

The point about keeping property out of a company is valid, but if it's a partnership it's irrelevant

 

[michm1]

It will be a Limited Liability Company. What are the differences between the directors (me and oh) owning the property or the company owning the property?

Sorry for the q's, will ask our accountant but we are really early stages yet so nothing is certain, so thanks to everyone for taking the time to reply - you really are making it a lot easier to understand!
Thanks