Is the rent on a property owned by a husband and wife excludable from the Flat Rate VAT computation for the husband? Is the property ownership seen as a separate legal entity?
Will HMRC see it that way? I don't want to ask them as he already registered for Flat Rate, and I don't know if that was a mistake...
Replies (5)
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Flat Rate VAT
Where the property income applies to the partnership, and not the sole trader, it is correctly excluded from the income for the FRS calculation. Do make sure the paperwork is consistent - is the property owned jointly? What about insurance; separate bank account, etc? Is income tax paid by the partners on the rental profit?
OPTION TO TAX
ALSO CAREFULLY CONSIDER "OPTION TO TAX" ELECTIONS FOR NOT JUST THE PROPERTY INCOME BUT ALSO PURCHASE- HOW WAS VAT ON PURCHASE ACCOUNTED ACCOUNTED FOR? (I.E. make sure no option to tax elections are in force)
this is easily missed becuse if the partnership is charging vat on any other rents.... the partnership needs to have an option to tax in force.the paperwork needs to be in order
Residential lettings
There's no Option to Tax available.
No VAT chargeable/recoverable.
The husband is a sole trader.
The letting income is joint.
No implications for FRS.