I am involved with a building which is partly commercial and partly residential.
The landlord is VAT registered as part of his regular trading activity, nothing to do with property, in the commercial part of the premises. So the rental income from the residential part is presumably an exempt supply and the income from the regular trading is a normal supply. If the landlord undertakes extensive repairs to the building, but less than £250,000 in cost, presumably he can reclaim the input tax on the repair work subject to an apportionment based on HMRC rules.
I am fairly sure about this but some confirmation would be most welcome!
This is the first time I have posted a question on "Accounting Web"
All contributions gratefully received,
Paul
Replies (7)
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Input tax on rented property
Strictly you are liable to carry out a Partial Exemption calculation. (Notice 706 is the place to start.)
Do consider opting to tax the property, so that the rent on the commercial portion is taxable, and therefore allowing more input tax recovery.
option to tax
You can opt to tax a mixed use building; the option is 'disapplied' in respect of the residential part.
If the landlord uses the commercial part for his own business then there is no need to opt to ax. If his activity is taxable, then a relevant proportion of the input tax is recoverable.
Partial Exemption Standard Method
It is always easier to use the standard method if (1) the calculation is practical, and (2) the result is fair. In the circumstances you have described, it does look the best option.
Partial Exemption Standard Method
No, you can use the Standard Method without HMRC approval.
Hope it works out ok.