Is rent VAT free?

Hello,

I'd appreciate some insight into this please.

If I have a tenant renting one of the rooms in my office from me, does he (or I) need to pay VAT on this?

Thank you.

If YOU are registered for Vat then you could charge
Vat. If YOU aren't registered for VAT then you can't
charge it.

If your tennant is registered he can reclaim the VAT,
but only if you charged it in the first place.

So, assuming you're not registered, you just charge your
rent, and forget about Vat.

If your tennant is asking about this it may be that he/she is Vat registered. But if you're not then there's nothing for him/her to claim back.

I just noticed you're talking about an Office, so it's entirely possible that you are BOTH registered for Vat. In that case you could possibly charge it. But make sure you set the rent (ex-vat) at a level you're happy with.

-Rd

Thank you

We are both registered companies, but are also friends so the rent agreement is quite informal.

By law should I include VAT or can we just forget about it?

Thanks,
Steve

By Law

Hmmm.
I'm thinking you should charge it. But someone more knowledgeable might correct me.

Either way there's no difference to you or him, you'll repay the Vat and he'll reclaim it.

I think this is one for your accountant. You'll need to make sure you're charging the correct rate etc.

-Rd

VAT on short term rent

VAT on rent is a deeply complex issue, so PLEASE don't rely on this post, but go and get professional advice. However, the following may be helpful:

1. It sounds like you own your premises. Do you?

2. When you bought your premises, did you have an entitlement to reclaim the V.A.T. on the cost? i.e. was your premises built since 1972 and always used by a vat-able business, thereby remaining in the vat net?

3. If both above are true, then doing a short term lease now is regarded as a "self supply" - i.e. taking the property out of the VAT net, but triggering a charge now (i.e. a VAT liability for you). I am not sure what the rules are for a partial self-supply, where (as in your case) you let out a part only of the property

4. If this self supply VAT charge is indeed your scenario, you can avoid this VAT charge by opting to account for VAT on short term rents (for VAT purposes short term is up to 10 years) BUT if you have other non-vatable rental income (i.e. a house) this option is not much help.

In short, you really, really must take professional advice. Sorry to be such a doom-monger