Ground Rent

Ground Rent

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Developer bought land, developed new flats which have been sold and now receiving ground rent.

How should the ground rent be accounted for?

I have in the back of my mind this may involve partial exemption etc.

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By Rob Fox
06th Oct 2010 15:12

Ground rent and VAT

The first grant of a major interest in each property by the developer will be zero rate for VAT (Schedule 8, Group 5, VAT Act 1994).  The ground rent falls outside this so is exempt from VAT (under Schedule 9, Group1).  Any VAT incurred on the costs of collecting the ground rent is exempt input tax and may not be deductible, depending on how much exempt inpout tax the developer incurs in all (see the de minimis limits in Regulation 106, VAT General Regulations 1995).

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