Should I be registered for VAT?


UKLandlordTax.co.uk
UK Property Tax Specialists
01902 711370
0800 907 8633
UK Landlord Tax Facebook Fan Page
Tax return forms are available free of charge from HMRC. We are independent accountants and not part of or affiliated to HMRC. We remove the stress and anxiety of preparing your tax return by completing and filing your tax return for you. We shall help you to pay the least amount of tax by advising you about the expenses which you are entitled to claim.
UKLandlord Tax.co.uk
Wolverhampton Science Park
Creative Industries Centre
Wolverhampton
West Midlands
WV10 9TG
01902 711370
0800 907 8633
UKLandlordTax.co.uk is the trading name of Thandi Nicholls Ltd Accountants Registered Office Creative Industries Centre Glaisher Drive Wolverhampton WV10 9TG Registered in England Company Number 7319439 Directors K W Nicholls FCA S S Thandi BA
Email:
Telephone:
Enter your question here and or tell us the best time to contact you:
Name:
The next step...
GET IN TOUCH
Free Help And
Advice

If you need some help to understand a property or capital gains tax issue, we offer a unique and free up to 15 minutes consultation by phone. There's no charge or strings attached and we will try to answer your query straight away.
If you are only letting out residential property and you only have PAYE income and or investment income you cannot register for VAT.

Income from residential property except furnished holiday lettings is exempt from VAT. If you are trading as a sole trader or in a partnership (which may be with your spouse) and own your rental property in the same capacity, then your rental property may affect whether you should be registered for VAT.

You must register for VAT if the turnover from your trade plus rent from your commercial property where you have opted to tax plus income from furnished holiday lettings in the last twelve months exceeds the registration limit which is 81,000 from 1st April 2014. It may be advantageous for you to voluntarily register for VAT depending on the type of property described below:



Commercial Property
If you buy a new commercial property then you will have to pay Value Added Tax on the full purchase price. You may have to pay VAT on a second hand property. Rents on commercial properties are exempt from VAT (provided that you do not provide a service) unless you make an election opting to tax. If your tenant is registered for VAT and makes only standard rated supplies, then there is no loss to them (other than cash flow) if they have to pay VAT on the rents which you charge.

You can then claim the VAT which you have suffered on the building along with any expenses which you incur. If your tenant is not VAT registered or makes exempt supplies, this may influence your decision. More information on opting to tax can be found in Notice 742A Opting to tax Land and Buildings produced by HM Revenue and Customs.



Furnished Holiday Lettings
Furnished holiday lettings are considered to be a standard rated supply for VAT. This should not be an issue unless you also have other taxable supplies in the same legal capacity or the gross income is more than 81,000. So if you and your spouse were in a VAT registered business partnership and also owned the property jointly, you would have to account for VAT on the holiday letting income but you would be able to claim any input VAT on the expenses.

If however, you were a sole trader registered for VAT and you owned the property jointly with your spouse then the furnished holiday letting income is received in a different capacity so VAT should not be an issue. If you are not registered for VAT and your supplies including the holiday letting income exceeds the VAT registration threshold (currently 81,000) in any 12 month period, then you would need to register for VAT and charge VAT at 20% on your holiday rentals.



Other Residential Property
If you buy a new residential property then it will be zero rated for VAT purposes. Otherwise the purchase will be exempt. If you are providing a service for example food and drink, then the supply will be standard rated but it is more likely that this income will be treated as trading income rather than income from property.

Generally, rents of residential accommodation are exempt from VAT. This does give a planning opportunity to make use of the partial exemption de minimis rules if you also make standard rated supplies. The property owner must be the trader, so if it is a jointly owned property, then the VAT trade must also be a partnership of those individuals.

Provided that the input VAT on the expenses for your property income and any other exempt income is 1) less than 50% of your total input VAT and 2) less than an average of 625 per month then you can claim all the input VAT including that suffered on your rental property. Remember that if you do claim the VAT then the expenses which you claim for income tax purposes must be net of VAT.





DISCLAIMER
Thandi Nicholls Ltd 2014 All Rights Reserved - The above article is provided for guidance only and may not cover your personal circumstances so you should not rely on it. It is important that you seek  appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. Thandi Nicholls Ltd t/a uklandlordtax.co.uk, K Nicholls FCA or S Thandi cannot be held responsible for the consequences of any action or the consequences of deciding not to act.