VAT on commercial property sub-let?

VAT on commercial property sub-let?

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We are currently renting a shop unit on which we are charged VAT.

We are considering sub-letting the whole property (with landlord's consent of course!) - do we have to charge VAT?

What if we are not VAT registered?

Thanks for your time.

(I have searched previous "any answers" and cannot see this particular question being asked before)

Replies (3)

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Quack
By Constantly Confused
13th Aug 2012 16:15

Option to tax

No, if you are being charged VAT it is because your landlord is registered and has opted to tax the building.  What he does is irrelevant to you however, the option is only effective to the person who made it, so it doesn't affect your onward supply.

So, you do not need to charge VAT when you let it onwards.  However, you may want to voluntarily, especially if your tenant is a VAT registered business.  If so, you need to register and opt to tax the building.

Thanks (1)
avatar
By shaun king
14th Aug 2012 12:26

If you are not VAT registered then the VAT is just a cost to the business. If you are VAT registered then if you sub let, you will be making an Exempt supply, in the absence of exercising the option to tax. If you make an Exempt supply you will need to consider whether you are de minimis for Partial Exemption purposes, otherwise there will be a restriction in the amount of VAT you can recover on the supply to you of the property by your landlord.

I cannot see any reason why you would not exercise the option unless your prospective tenant is not VAT registered or indeed you are not but with anything to do with property and VAT you need to consider the bigger picture!!

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Pic01
By zxcvb
14th Aug 2012 16:35

Thanks for the responses

One satisfied user!

 

Many thanks 

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