The sale or lease of a commercial property is generally exempt from VAT. If so, the purchaser or tenant does not have to pay VAT. That may be very good overall, however, when a vendor or landlord makes an exempt supply of a property, they are unable to recover VAT incurred on related costs. These can be significant.
Should I charge VAT commercial property rent?
As a general rule, the sale or lease of a commercial property is exempt from VAT, which means neither a purchaser nor a tenant would have to pay VAT. That exemption extends to the exchange of interests in, rights over or licences to occupy commercial properties.
Can I charge my limited company rent?
You cannot charge your limited company rent unless there is sufficient evidence of the arrangement so you will need to set up a formal rental agreement between yourself and the limited company. You should also ensure that you have a Board Minute recording the agreement.
What is the VAT rate on commercial rent?
The general rule is that leases are exempt from VAT. From 1 July 2008 the lease of a commercial property is exempt from VAT, subject to a landlord’s option to tax the rent at a rate of 23% as a supply of a service.
Can a VAT registered company charge rent for office space?
My VAT registered Ltd Company is going to charge rent to another VAT registered ltd Company that I am also a part owner for using some desk space. The rent it charges will include all bills from utility bills, cleaning bills, internet and phone calls.
Can a landlord charge VAT to a third party?
My client rents office space and their landlord charges them VAT. They have the whole of the first floor and are considering letting out a section of it to a third party. As they are charged VAT on the rent I imagine they should also charge VAT on rent to their tenant, is this correct?
What is the VAT on commercial property rent?
In general, there are four main principles to consider for commercial VAT purposes: VAT exemption: What is it? As a general rule, the sale or rental of a commercial property such as a shop, warehouse, office or restaurant is exempt from VAT, meaning neither the individual purchasing the property or the prospective tenant would have to pay VAT.
Do you have to pay VAT on rent to 5 tenants?
An option to tax only applies to a person’s interest in a property. For example, someone owns a ten storey office building and lets to five tenants, each occupying two floors, and there is no option to tax in place. The rent collected by the owner is exempt from VAT.
