Property business - register for VAT?

Nov 24, 2003 1 Replies
A

Hi all,



Friend runs a business - basically buying properties for buy-to-let purposes



Her accountant advises against voluntary registration for VAT because she would have to charge VAT on the rents ie increase by 17.5% OR pay VAT element from rent at current levels thus reducing her net proceeds.



Is accountant correct ie that rents are a vatable item? I thought registration would benefit her as she an reclaim most/all of her input VAT, but if the above is correct, it would not actually be the right thing to do



Any advice appreciated



Cheers


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R

The accountants advice is right but for the wrong reasons if the property is residential, and not holiday lets or commercial property.

There is no VAT on rent from long term residential lets - they are exempt from VAT. Consequently the VAT on associated costs are not recoverable, and your friend won't be allowe to register for VAT anyway.

Holiday lets - this will usually be held out for let as holiday accommodation, and as such the charge is subject to VAT (subject to being registered, etc.).

Commercial property - the owner can elect to charge VAT on the rent on commercial property, but this also means the sale of the building will also bear VAT.

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