VAT on Commercial Property altered to mixed use
I am trying to understand the VAT position on a property as follows.
Property has been owned for some time. Originally both floors of property were offices, property was opted to tax and VAT charged on rents etc.
One floor has now been converted to residential and let out as flats.
I understand from looking into this that the rent charged on the residential part is exempt from VAT and that therefore the input VAT on a proportional part of the expenditure in relation to the property should be non-recoverable, and that (in the absence of any specifics) the best way of apportioning the expenditure is on a rental income basis.
What I don't know is that if the property is opted to tax originally, whether the VAT incurred on the works to alter the property from commercial to residential can be recovered? And also if we need to notify HMRC in any way that the income is now partially exempt from VAT.
One further question. The electricity is invoiced to the Landlord and charged out to the tenant. Should we a) claim the input VAT on the electricity and then invoice out to the tenant plus VAT on a proper VAT invoice, or b) not claim the VAT on the electricity and then invoice out the gross cost to the tenant. The net effect is the same, I just wonder which is the correct treatment.
Any help would be very gratefully received - and if you can quote the relevant guidance that would be even better. Thank you.
- Letter to HMRC over 3 months ago, still no reply 1,880 19
- Companies House paper incorporation - date of birth omission 218 4
- Turnover on a tax return 125 7
- incorrect old p60 375 9
- US company hiring UK citizens in UK 223 3
- VAT refund 106 1
- Is there an AIA calculator anywhere 188 1
- Reclaiming VAT on refurbishment cost? 254 3
- Missing tax return 361 4
- Are you going to Tick and Bash on 21 May? 1,094 30
- Inflation and fees 1,389 24
- Sage Priority Support 177 3
- Cost of demolition of a shed - revenue or capital? 833 24
- Micro-entity accounts 262 1
- Related party disclosure 220 3
- Company reconstruction 153 1
- Rolled up interest and late interest rules 240 6
- US LLC - anomaly in UK and US treatment 161 3
- Basic Tools and PAYE succession 182 1
- Advice please! 428 2