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gary7
02-03-2009, 09:16 AM
I am thinking of setting up a limited company for new property purchases. Does anyone know what happens with respect to VAT and rental income, e.g. is the rent charged to tenants subject to VAT?
King_Maker
02-03-2009, 10:16 AM
Residential or Commercial properties?
mazzster
02-03-2009, 10:18 AM
Are you renting to residential or commercial/industrial?

If residential, rent is an exempt supply, hence no VAT to charge, but also you cannot reclaim VAT on your purchases (eg repairs etc).

If commercial, it gets a bit more complicated.

Which is it?
jeffrey
02-03-2009, 10:25 AM
If residential, rent is an exempt supply, hence no VAT to charge, but also you cannot reclaim VAT on your purchases (eg repairs etc).

If commercial, it gets a bit more complicated.
No. Residential is zero-rated; commercial is exempt but with option to tax.
King_Maker
02-03-2009, 11:01 AM
No. Residential is zero-rated; commercial is exempt but with option to tax.

I would have to disagree - residential is Exempt. If it were Zero rated, there would be no VAT problem for reclaim of Input Tax.

New Residential SALES are Zero rated.
mazzster
02-03-2009, 11:23 AM
Yes, something along the lines of residential sales of a major interest (being >21 years in England) within the first 3 years of construction are zero rated, otherwise exempt.

Big hoohaa recently because lots of developers of new build residential properties decided (after the market fell significantly) to rent their new build properties out, and sell at a later date. This then meant they couldn't reclaim input VAT on the construction cost.
Telometer
03-03-2009, 08:38 AM
VATA 1994 Sch 8 "Zero Rated Items" Group 5 - Construction of buildings etc.

VATA 1994 Sch 9 "Exemptions" Group 1 - Land

VATA 1994 Sch 10 "Buildings & Land" includes the election to waive the exemption (a.k.a. "option to tax")
gary7
03-03-2009, 14:33 PM
Thank you to everyone for your advice - and sorry for not clarifying it is residential lettings ... so this is zero rated. :)
King_Maker
03-03-2009, 14:46 PM
Thank you to everyone for your advice - and sorry for not clarifying it is residential lettings ... so this is zero rated. :)

No - not in respect of rental income, it's exempt.