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Landlord has been charging vat on rent for 5years

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I've just joined a garage that is vat registered. It's a car mechanic garage. We are currently entering into a new lease with the same landlord who intends to sell the property with us a tenant. I was looking over the last 5 year lease and the new 5 year lease and the new one was a lot shorter. So I delved into the differences. The first lease we was charged vat for everything. The rent over 5 years, the fixtures and fittings, everything. And it's an fri lease. We have never received a vat invoice off the landlord. Ever. For anything. The new lease has no vat on the rent? Does this mean the landlord is no longer vat registered? We have no idea if/ when he deregistered (I know that's not a word). And if he did, shouldn't he have stopped charging us vat and our rent decreased? Everything I've read states that theres big repercussions for these kind of 'mistakes'. I'm just asking for advice on where do we stand? 

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By jonharris999
30th Jun 2022 07:04

Does the old lease expressly state that VAT is/was to be charged on the rent?

If the business hasn't received VAT invoices, how do you know that it has paid VAT? Has it been reclaiming VAT period by period?

Have you asked the landlord to explain why the first lease apparently has VAT and the new one apparently doesn't?

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By rmillaree
30th Jun 2022 08:10

As a started your landlord should at minimum confirm exactly which peirods vat was charged for and which peeriods vat was not cnarged for - that should never be in doubt and they are the ones to confirm.

ref rent income its option to tax or not - so vat may be charged one minute and not the next minute. This is the same with any poarty you do business with eg your overall cleaning company may be vat registered one minute and deregister the next.

Vat invoice are always key always for all ongoing invoices on all occassions.

Independently of that there is the contracts you sign - you are leaving yourself in a "weak" position if you dont confirm vat on contracts. So if lease is silent on vat that leaves scope of thing to perhaps not be as you expect.

Its your businesses job to ask for vat invoices and determine what vat is on expenses before you agree owt - if you dont do that and £1200 per month incl vat changes £1200 per month with no vat and you pay that - its hard to prove whether you have any comeback later . Particualrly if lease simply says rent £1200 per month - you should have been looking at that and saying - lease should state £1000 + vat (if applicable) please.

Note if your landlord vat deregistered mid contract and upped your rent that does leave a very bad taste - but if thats the lease you signed up for (simply £1200 per month)

Any quibbles over whether price has gone up if its known option to tax stopped is more legal in nature than accountancy - it probably depends on the lease details.

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By Paul Crowley
30th Jun 2022 09:21

Very peculiar
Sounds more like the prior lease was in error and the opt to tax did not happen.
Get a decent VAT advisor on it
Could be that there was no VAT paid over to HMRC.
That gives the garage the big problem of claiming fictional VAT, because there are no VAT invoices
Do not try to sort this out yourself.

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By SteveHa
30th Jun 2022 11:20

Possibly an OTT that has been revoked on the 20 year anniversary.

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By adam.arca
30th Jun 2022 12:43

Did the previous lease definitively mention VAT on top of the rent?

Did the rental payments made indicate that VAT might have been charged: eg £1200 payment would tend to imply £1000 plus VAT. That's not probative in itself but it might be indicative.

If answer to the above two questions is 'no,' then you may well be looking at a previous bookkeeping mistake at your end. Very easy to do with software making things too simple. And reclaiming VAT without the underlying paperwork is supposed to a big no-no notwithstanding the fact that slapdash types do it all the time.

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Replying to adam.arca:
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By Paul Crowley
30th Jun 2022 12:52

'slapdash types do it all the time.'
So does all the software

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By More unearned luck
30th Jun 2022 13:46

No one can take even a half considered view when there is a fact vacuum as big as this. Please ascertain as many relevant facts as you can and report back. The comments made by others gives clues as to what you need to find out.

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