# VAT on rent



## gilboy (14 Jan 2009)

I pay 13,500 a year on rent for a retail premise. I am getting hit very bad for VAT lately. I remember hearing some time ago, even if you did not exceed the 37,000 income you could still register for VAT. Hence, wondering if my landlord could register for VAT.

I have a good relationship with my landlord. First of all, does he have to register for VAT in order for me to  offset the VAT which I pay on my rent(13,500 would be inclusive of VAT) against by VAT liability.

Secondly, if he does have to register for VAT does that mean that he will then have to make VAT returns himself


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## mercman (14 Jan 2009)

Are you sure your Rent includes VAT ?? Most private landlords choose not to register for VAT. Yes if he does register for VAT of course he will have to do returns every two months. If you are not been invoiced for the rent and there is no VAT on the Invoice, I doubt if the 13,500 includes VAT.


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## gilboy (14 Jan 2009)

You can register for VAT though if you earn less than 37k. I am just wondering if you do register, are you liable to make returns


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## mercman (14 Jan 2009)

Once registered, VAT returns are obligatory.


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## mathepac (14 Jan 2009)

gilboy said:


> You can register for VAT though if you earn less than 37k. I am just wondering if you do register, are you liable to make returns


Yes but what's the point if you haven't reached the ceiling and don't charge it on invoices?

In your example if your landlord registered, he would have to charge you 13.5K + VAT rent just to maintain the status quo for himself (assuming you ignore his extra book-keeping costs). It certainly doesn't help him - how do you think it helps you?


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## gilboy (14 Jan 2009)

Thanks mercman

OK - lets assume in this scenario the annual rent is 13,500.

If my landlord registers for VAT, I can offset 21% of 13,500 against my VAT bill.

At the end of the year, my landlord will not have exceeded the VAT threshold of 37k. Will he have a VAT liability? I understand he will have to make VAT returns but I just want to determine will he have any VAT liability at the end of the year

Thanks


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## elgransenor (14 Jan 2009)

Vat on rent on leases is a very technical and complex area.

You need to consult either a solicitor or a tax advisor.

Even solicitors struggle with the complexities involved.


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## Graham_07 (15 Jan 2009)

elgransenor said:


> Even solicitors struggle with the complexities involved.


 
as do accountants and Revenue , believe me. 

The OP seems to think that they are being "hit for VAT" on the rent even though they also think the landlord is not registered for VAT.  The implication in the original post is also that the OP is themselves presently registered for VAT. ( is this correct ? ) 

If so, then as mathepac said, if the landlord registers for VAT then that would be ON TOP OF the existing rent. That would not ease things for the OP in any way. They pay the landlord more and claim an input credit for the VAT so back to where they started. 

VAT on property transactions took a major change in 2008. Appropriate professional advice is always advised in these areas.


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## gilboy (15 Jan 2009)

Just wanted to provide some clarification to my original post.
I am registered for VAT. My landlord is not registered for VAT.

Currently our VAT build is choking the business. What I am trying to determine, if my landlord registered for VAT and we agreed that the annual rent I am paying(15k) is inclusive of VAT going forward:

(1) I can offset this against my VAT bill, right?

(2) Will it affect my landlord, i.e. even though he registers for VAT, the annual VAT that he would collect on the rent from me would be below the VAT threshold. Or is it the case, that if you register for VAT whilst earning less than the threshold, you still pay VAT on your earnings, e.g. 21% of 15k. I was thinking he would have to make his VAT returns during the year and then at the end of the year look for a rebate of the VAT payments he made because he is under the threshold.

Thanks


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## mercman (15 Jan 2009)

gilboy said:


> Just wanted to provide some clarification to my original post.
> I am registered for VAT. My landlord is not registered for VAT.
> 
> Currently our VAT build is choking the business. What I am trying to determine, if my landlord registered for VAT and we agreed that the annual rent I am paying(15k) is inclusive of VAT going forward:
> ...



Is your landlord registered for VAT or not ?? There seems t be a misunderstanding. If he is, then it would be the rent plus VAT, not inclusive of VAT.  Are you been invoiced for the rent plus VAT with a VAT number been advised to you.


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## gilboy (15 Jan 2009)

Landlord is not currently registered for VAT. Hence, I am currently paying no VAT on rent.

I have informed the landlord the business is currently struggling. He wants to assist in whatever way as the chances of him getting new tenants for premises is very low.

Hence, I am trying to determine, where he to register for VAT - the 15k rent would change to 11850 + 3150 VAT. This would mean I could offset 3150 a year against my VAT bill. 

At the end of the year, since his income on the rental premises is less than 35K, would the landlord get a rebate of the VAT he collected from me,i.e. a rebate of 3150

Thanks


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## mercman (15 Jan 2009)

No this is what would be called creative Accounting. In Simplicity, it VAT is charged on Outputs it must be paid to the Revenue, less the inputs in relation to the trade which is VAT registered. The only way to assist your dilemma is for the landlord to lower your rent or move to a cheaper premises.


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## Graham_07 (15 Jan 2009)

Why on earth should the landlord register for VAT and keep the gross total the same, he is going to lose out. His rent would then fall !!!. If he registered he would charge + VAT to stay the same. He would not get a rebate, once registered thats it.


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## contemporary (15 Jan 2009)

if I was your landlord and I was charging you 15k for rent and you wanted to get vat on the rent then I would charge you 18225 instead. No landlord is going to take a 21.5% hit for you, unless their family perhaps


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## gilboy (15 Jan 2009)

Right, so if landlord was to register for VAT at the end of the year he cannot look for a VAT rebate because he is under the threshold. Thanks, this is what I was trying to confirm.

As rgds all the posts about the landlord been crazy to reduce his earnings by 21% - from my experience approaching landlord early and telling them business is in trouble you will find they can be quite flexible. 

In my area, I have noted premises for rent well in excess of 12 months. Landlord would much prefer to have people in his premises at a lower rent than having it empty.


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## Graham_07 (15 Jan 2009)

gilboy said:


> As rgds all the posts about the landlord been crazy to reduce his earnings by 21% - from my experience approaching landlord early and telling them business is in trouble you will find they can be quite flexible.
> 
> In my area, I have noted premises for rent well in excess of 12 months. Landlord would much prefer to have people in his premises at a lower rent than having it empty.


 
He might reduce it by 21% to keep a tenant, fair enough, lots are reducing rents to keep tenants. But going through the VAT route is not the way to do it.


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## mercman (15 Jan 2009)

Graham_07 said:


> He might reduce it by 21% to keep a tenant, fair enough, lots are reducing rents to keep tenants.



Some do and some don't. As a landlord, I wouldn't even consider it. Call me tight but I'm not a charity


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## gilboy (15 Jan 2009)

> Some do and some don't. As a landlord, I wouldn't even consider it. Call me tight but I'm not a charity


 
Well I let out a house in Dublin the lease of which is up in April. Same tenants in it for the last 2 years and have been very perfect tenants. I have noted rents reducing in Dublin so if I have an opportunity to keep the same tenants whilst reducing the rent I will definitely do so. 

Ship is floating while there is some income from the house. Coupled with this, there is a huge amount to be said for having tenants who look after the place, pay rent promptly etc.


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## Graham_07 (15 Jan 2009)

gilboy said:


> so if I have an opportunity to keep the same tenants whilst reducing the rent I will definitely do so.
> 
> there is a huge amount to be said for having tenants who look after the place, pay rent promptly etc.


 
Definitely agree. Better have 80% of previous rent than none. What is it said about half a loaf better than no bread . Too many vacant residential lettings around our neck of the woods.


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## mercman (15 Jan 2009)

Residential leases are completely different than Commercial leases. If its a full repairing lease with a PG you're not comparing like for like.


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## gilboy (15 Jan 2009)

If the property in question, be it residental or commercial is financed via a mortgage I don't see such a big difference. Not sure what PG is, but were I a landlord of a commercial unit I don't think my attitude would change regarding possible reduction of rent for reasons outlined earlier.


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## mercman (15 Jan 2009)

A PG is a Personal Guarantee. If you have signed a PG you are personally liable for the rent and the condition of the building and all other terms in the lease. The mortgage has no bearing on the rent. This is the amount that is owing to a Financial Institution and they really don't care as long as the mortgage is being paid.


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## WaterSprite (15 Jan 2009)

gilboy said:


> Landlord is not currently registered for VAT. Hence, I am currently paying no VAT on rent.
> 
> I have informed the landlord the business is currently struggling. He wants to assist in whatever way as the chances of him getting new tenants for premises is very low.
> 
> ...



VAT registration is not obligatory unless you get more than €37.5k for services in the year.  But, if you register for VAT, you have to charge VAT, and remit it to Revenue, even if the amount you get is below the €37.5k.  The €37.5k is not a floor under which you don't pay VAT if you are registered - it's just a trigger for when you must register.  I think that's the confusion here.


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