v.a.t on new lease .

[setemupjoe]

Can anybody tell me how the vat is calculated on a newly created retail lease . new 25yrs lease , 40k p.a. rent . and also whats the most efficent way of handling this? can i reclaim the vat from revenue before paying the landlord up front (if he agrees ) or will the revenue just do this vat transaction on paper as i will be paying and claiming back within short period ? any advice welcome.

 

[Nige]

Provided there is no rent review before the 5th anniversary of the lease date, you have three options to value the lease for VAT purposes:

- annual rent * 75% * number of years
- annual rent * multiplier (currently 21.27 I think) or
- competent valuation (this is the only method acceptable if there is a rent review within 5 years).

VAT is then charged at 13.5% of the vat valuation.

In order to avoid a cashflow issue, you can use the VAT 4A procedure which effectively means you self account for the VAT (so you don't pay it over to the landlord). You must apply to the Revenue in advance to have the VAT 4A procedure apply. Otherwise, you pay the VAT to the landlord and reclaim in the VAT return for the period.

 

[bazermc]

Dont forget the economic value test must be passed otherwise it will be a deemed exempt lease!

section 4A is the best way to go avoids the VAT cash flow costs, assuming you are in a 100% recovery position

 

[Nige]

Dont forget the economic value test must be passed otherwise it will be a deemed exempt lease!

As that's the landlord's problem, I'm sure he (or she) will make sure the economic value test is passed.

 

[setemupjoe]

Thanks guys for that info .......it has a five year upward only rent review . I am vat registered so hopefully 4a will be the way to go .