Share this content

VAT On Rent

VAT On Rent

I operate a small company and my wife operates another. We each prepare the books and records for our own business and we are careful about doing things in the right way.

My company is VAT registered and rents premises from a landlord who charges me rent in the normal way. £1000+ VAT per month

My wife's business is VAT exempt.

It is my intention to let her use some of my premises for her business and to charge her a rent of £200 + VAT for the space.

Can anyone help with this?

Are there any rules about this situation that I should be aware of?

What about common costs like rates & power etc.

Thanks for you help in advance because if I get this wrong I'll never hear the end of it!


Please login or register to join the discussion.

By Anonymous
17th Feb 2010 19:16


if you're worried about getting it wrong, why not do the sensible thing and speak to your accountant. Your question requires more than a one-line answer, as there are a number of solutions, and you should therefore be prepared to pay for appropriate advice.

Thanks (0)
By DMGbus
18th Feb 2010 08:55

No obligation to charge VAT unless...

Property rent does NOT have VAT charged on it unless the landlord (or sublandlord as in yourself in this case)  charging the rent goes through the formal "Opt to tax" process.   

ie.. There's no VAT charged on property subletting income unless you've completed certain VAT forms (in the VAT1614x series).   

By NOT charging VAT on the rent your business becomes "partially exempt" and the reclaim of VAT on the rent paid to your landlord may or may not be fully recoverable according to "partial exemption" rules which have special calculations to determine the VAT recovery.

If you go down the "opt to tax" route you would charge VAT on the rent and thus avoid the partial exemption complications.  However by doing this you are bound for 20 years to charge VAT on any rent from the specified premises and lease disposal proceeds (subject to TOGC rules).




Thanks (0)
18th Feb 2010 09:01

Option to Tax

You should also note that there are rules on opting to tax that prevent an option being exercised where a person is going to be letting (or subletting) to a connected party (such as a wife) who makes exempt supplies. So if when you say your wifes business is VAT exempt, you actually are accurate and mean she makes exempt supplies, then you may not be able to charge her VAT anyway.

As above land and property transactions can be complex, you need to talk to someone wha can get the full facts about your business and advise accordingly. (Although given the amounts you say are involved I suspect that even if your business does become partially exempt that it won't cause you too many problems, if it is just restricted to this one bit of exempt trading)

Thanks (0)
By Anonymous
18th Feb 2010 10:03

VAT on Rent

Thanks for your help on this, particulayily DMGbus and Spidersong who gave some good advice which I will follow.

Insofar as the advice from "Anonymous" is concerned I will completely disregard it as completely off the point and of no use. The fact that I am an accountant and was seeking advice from similar like minded individuals on a forum for accountants would lead me to advise the poster to read and consider the posting before responding, or, even better, don't post at all.

Thanks (0)
By Anonymous
18th Feb 2010 11:47

Geez - some people are touchy today

There's nothing in your post that suggests that you are a practising accountant (if you are, clearly not a tax-qualified accountant) so I assumed, albeit a dangerous thing to do, that you were simply a businessman seeking advice. My response was curt for two reasons - (a) it would be dangerous to rely on advice on VAT and land/property given here (b) the type of advice that you need is exactly the type of advice that I charge my clients for. What makes you so deserving of free advice where others have to pay for it?

Thanks (1)