VAT on rent

[frankie007]

I run a small catering business adjesent to a brewery. We made a deal where I pay percentage of sales to them as a way of paying rent. Now I have been told that in order for me to get an invoice they have to charge VAT on top of the amount. I had similar deals in the past and never had VAT added to the rent. I would appreciate any insight about this.

 

[frankie007]

I run a small catering business adjesent to a brewery. We made a deal where I pay percentage of sales to them as a way of paying rent. Now I have been told that in order for me to get an invoice they have to charge VAT on top of the amount. I had similar deals in the past and never had VAT added to the rent. I would appreciate any insight about this.

I am not VAT registered

 

[GLAbusiness]

Commercial property (offices, shops, industrial units, etc.): rent is normally exempt from VAT unless the landlord has "opted to tax" the property. If they have opted to tax, they must usually charge VAT at 20% on the rent.

 

[Tables Force]

I run a small catering business adjesent to a brewery. We made a deal where I pay percentage of sales to them as a way of paying rent. Now I have been told that in order for me to get an invoice they have to charge VAT on top of the amount. I had similar deals in the past and never had VAT added to the rent. I would appreciate any insight about this.

This does not make sense.

If you have an agreed amount to pay, that is the amount you pay. End of.

If they are VAT registerd, and have opted to tax the property, the VAT should already be included in the amount you pay. That you are now requesting an invoice make no difference to their VAT obligations.

If you have a written agreement with them and there is no mention of VAT in there, you tell them that the VAT was included in the amount you paid.
If the agreement says that you are paying X-percentage excludin VAT, than you would have to add it on to the percentage you are paying - but again this has nothing to do with your requesting an invoice.

Edit: Oh, and BTW, the fact that you are not VAT registered makes no difference whatsover.

 

[WaveJumper]

The devil is in the detail, you say you "made a deal" was this in writing if so what does the agreement say.

Just a guess here (as been involved in commercial property and retail parks in a past life) this was a "cash deal" and now you are asking for an invoice which the brewery are going to have to show in their books ....... just a guess

Ive rocked up at many a retail park for the investors to find a burger van outside a retailers premises and paying the local manger (cash) for the privilege, when in fact they are actualy on the landlords property and should be paying them, was always an interesting conversation.

 

[frankie007]

The deal was not in writing and the invoice is going to be one of the expenses I am submitting ro HMRC so it is important for me which I said from the beginning I am arguing that if the VAT is added than percentage agreed goes up.....
Thank you for taking time to answer my question, it is appreciated

 

[Mark T Jones]

The deal was not in writing and the invoice is going to be one of the expenses I am submitting ro HMRC so it is important for me which I said from the beginning I am arguing that if the VAT is added than percentage agreed goes up.....
Thank you for taking time to answer my question, it is appreciated

As above, there is no absolute answer, it's all about the discussions and agreement details.

This is where 'nod and wink' goes wrong!

As a broad point, it's normal for business quotes to be ex-vat, which may be where the confusion arises

 

[Tables Force]

The deal was not in writing

Then I guess not much you can do other than try and argue with them, but at the end of the day what happens if they tell you 'you don't wanna pay the VAT, the deal is off' and you have to pack up shop?

and the invoice is going to be one of the expenses I am submitting ro HMRC so it is important for me which I said from the beginning I am arguing that if the VAT is added than percentage agreed goes up.....
Thank you for taking time to answer my question, it is appreciated

Well, as you are not VAT registered the VAT is just added on to the expenses, which means your profit is lower so less tax to pay (every cloud has a silver lining).

 

[DontAsk]

Well, as you are not VAT registered the VAT is just added on to the expenses, which means your profit is lower so less tax to pay (every cloud has a silver lining).

I don't call that a silver lining unless you are only interested in stuffing the tax man.

I'd take higher profit and higher tax every time. Hint: you get to keep more that way.

 

[Frank the Insurance guy]

We made a deal where I pay percentage of sales to them as a way of paying rent

Have you considered looking at this another way.
1. They provide you with FREE use of the site
2. You enter into a sales/commission/share agreement with them

On this basis, they do not charge you rent (therefore no invoice, with or without VAT). You then need to provide your own account/credit note to them declaring their earnings as a % of your sale and sending them the money.

 

[frankie007]

Frank the Insurance guy I suggested this to them but they said "this is not how invoicing works". I have done exactly that in the past but now wander was it ever legal?

 

[Frank the Insurance guy]

Frank the Insurance guy I suggested this to them but they said "this is not how invoicing works". I have done exactly that in the past but now wander was it ever legal?

If they are now saying they have to raise their own invoice for rent, there is unlikely much you can do other than argue that the agreed % sales is the total invoice INC vat.

If they do not agree to do that, then it is up to you to negotiate revised terms or find another location.

 

[frankie007]

Thanks for the input, I am seeing them tomorrow to discuss further

 

[WaveJumper]

Good luck and let us know how you get on

 

[Paul Kelly ICHYB]

You are not paying rent in the traditional sense. You have a concession.

If the other business is VAT registered, they will have to charge you VAT.

Why not tell them that the payment from you is VAT inclusive/gross i.e. if you give them £120, they will have to invoice £100 + VAT

 

[frankie007]

We had a talk and decided that the percentage agreed includes the VAT. As the percentage was higher than we discussed in the very beginning I think it was a fair outcome for both parties. Thanks again to all for your opinions and input, it is very appreciated.