VAT on building and sublease

VAT on building and sublease

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One of my client had commercial building on lease and she was paying rent plus VAT to its owner. Now, she has stopped using the building and start subleasing it. But she got registered a limited company to manage the building and subleasing it (company is also registered for VAT and opted in) She has asked her landlord to issue invoices on that company name, also she will be receiving rent plus vat in that company from her tenants.

My worry is, she and limited company is two different entities and lease agreement is on her own name but she got registered limited company to sublease it. The owner of the building is happy to issue invoices on company name but he don’t want to make any changes on initial lease agreement.

Is it right to do from VAT point of view? Can she use limited company to receive rent and pay rent while lease is on her own name?

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chips_at_mattersey
By Les Howard
04th Jul 2014 13:07

Rent

(Ideally, you should get someone to review the documentation to give a more detailed reply.)

The landlord can act as agent for the company in respect of the sub-lease. If the company has opted to tax (which is a separate decision to that of the landlord) then VAT is charged to the sub-tenants. The landlord/agent collects the VAT on the company's behalf.

But do make sure the contracts are correct, and match the route of payments and invoices.

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By ninja
04th Jul 2014 16:09

Thanks for your help
 

Thanks for your help

 

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By Alastair Johnston
07th Jul 2014 18:54

All wrong!
The VAT position is a mess.
While the head landlord (HL) can act as agent for the mid landlord (ML), the problem here is that your client's company is not the ML. HL's supply is to the ML, i.e. Your client personally. Any other purported VAT invoice by HL is invalid.
Similarly there is no supply by the company to the subtenant (ST). So any VAT invoice issued by it or on its behalf for rent of the property is invalid. And the fact that HL agreed to issue these dud invoices for the company is no excuse.
So there will be invalid VAT invoices issued by HL on its own behalf; VAT suffered by your client for which she has no invoice; failure by her to issue VAT invoices if she has opted to tax; issue of invalid VAT invoices on behalf of the company; ST erroneously reclaiming VAT on the basis of said invalid invoices ... that's enough to be going on with for now.
An overriding sublease by your client to her company would partly solve the problem.
Get your client to invoice properly!

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