I have a client who is registered for the flat rate scheme and has a little bit of rental income which is also included in the turnover to calculate the VAT due to HMRC. She has a letting agent and I am wondering if I have to include the gross rent or could use the net rent for inclusion for the purposes of the flat rate calculation. Hitherto I used the gross rent but I wonder if this is incorrect. Does anyone know the answer?
Many thanks
Replies (4)
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I think this is my favourite Aweb TV moment. Glad I tuned in to this episode - still making me smile.
Gross rent is correct for FRS turnover.
As a rule of thumb, the FRS does not work with rental income, as it increases the overall amount of VAT due. Have you done your sums?
There would have to be an advantageous flat rate to make staying in the scheme worthwhile. If it is a limited cost trader surely the VAT on your fees and the letting agent's fees would be more than the .2% saved under the scheme even before adding the VAT on the rent. Since a partially exempt business can also claim VAT on the exempt supplies subject to certain limits. Maybe it is a cafe or similar and the rental income is v small and you have done your calculations.
You are doing it correctly by including the gross rent.