Should I charge VAT on Residenital Lettings?

VAT on Residenital Lettings

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Hello, I work as a contractor and run my business through a limited company that is already registered for VAT (flat rate). I am now thinking about buying and letting residential property through my limited company.

Will I have to charge VAT on the rents I charge tenants?

I've read conflicting information online. Some articles confirm that residential lettings are exempt from VAT; however, others add that you may be required to charge VAT if your business is already registered for VAT.

I'd appreciate insights from people who've be through this before and have received professional advice.

Thanks!

Replies (7)

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Scalloway Castle
By scalloway
29th Aug 2016 15:48

Normally residential lettings are exempt from VAT. If you are using the flat rate scheme (FRS) then they become part of the turnover and VAT will be payable.

If you are not on the FRS and buy residential property through your existing company your business will become partially exempt. This creates problems for recovering VAT on expenses.

I strongly advise getting professional advice on this as getting it wrong could be expensive.

Thanks (1)
Replying to scalloway:
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By bottines
03rd Sep 2016 16:20

Thanks. It turns out my business is on the Standard Rate (not the Flat Rate Scheme). Creating a separate company for residential letting sounds easier than going down the route of partial VAT M exemption (for the lettings side of the business that is).

Thanks (0)
Replying to bottines:
RLI
By lionofludesch
03rd Sep 2016 16:32

Quote:

Thanks. It turns out my business is on the Standard Rate (not the Flat Rate Scheme).

[sigh]

Thanks (1)
RLI
By lionofludesch
29th Aug 2016 19:35

Agree. You need to disclose all the facts to your adviser and you should seriously consider not buying these through your existing company.

Much depends on the ratio of exempt to taxable turnover.

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Worm
By TheLambtonWorm
30th Aug 2016 10:49

Setting up a new company for the properties may be easier (it depends on many things), but as others have said, you need proper advice on this where all the facts are taken into account.

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chips_at_mattersey
By Les Howard
30th Aug 2016 11:38

But if you set up a new company, you should not the 'associated person' rule, which may prevent future use of the FRS.
HMRC Notice 733, para 3.8 refers.

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By shaun king
31st Aug 2016 14:38

However, if you buy commercial property to convert to residential property then there are further VAT considerations.
All of this just demonstrates that you need good sound professional advice!!!

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