VAT on Commercial property

[hcd]

Hi, iam looking at a property now and didnt realise till today that VAT is added to the rent, is this common in retail property?

In my previous businesses VAT was not added to the rent. Can this extra VAT be claimed back or would it be negotiable??? :confused:

[yeahbutno]

Not my specialist area but I know that VAT can be charged on Commercial leases in certain circs. I would *assume* that you can claim the VAT back but only if you are VAT registered yourself.

[Tax Accountant]

Hi, iam looking at a property now and didnt realise till today that VAT is added to the rent, is this common in retail property?

In my previous businesses VAT was not added to the rent. Can this extra VAT be claimed back or would it be negotiable??? :confused:


VAT position on commercial properties is decided on circumstances relating to the individual properties themselves.

In most cases, the investor owners have to register for VAT to enable them to reclaim the VAT which they themselves were charged when they bought the property. In turn, the investor landlords would then have to charge VAT on rents to their tenants and also charge VAT on the selling price if and when they decide to sell the property.

As far as you are concerned, you do not have a choice in this matter.

If you are registered for VAT, you would be able to reclaim the VAT as Input tax.

If you are not going to be registered for VAT, you will have to absorb the VAT on rent as additional cost to your business.

Ramnik

[Editor]

VAT on property is a highly complex business and you should seek professional advice where appropriate.
My understanding is that where VAT is charged on rent either the owner has "opted the building in" to VAT, perhaps to recover VAT on development or refurbishment works, or the building had already been "opted in" when the owner bought it. Once the building has been "opted in", you cannot subsequently "opt out"!
Owners need to be careful about this as "opting in" may restrict their possibilities for letting, eg insurance companies and some small business will not be able to recover VAT.

[Tax Accountant]

VAT on property is a highly complex business and you should seek professional advice where appropriate.
My understanding is that where VAT is charged on rent either the owner has "opted the building in" to VAT, perhaps to recover VAT on development or refurbishment works, or the building had already been "opted in" when the owner bought it. Once the building has been "opted in", you cannot subsequently "opt out"!
Owners need to be careful about this as "opting in" may restrict their possibilities for letting, eg insurance companies and some small business will not be able to recover VAT.

Just to add to the above, if a building has already been 'oped in by the previous owner, the new investor owner may be able to decide not to continue with the 'opting in'. In that case, he/she will not be able to reclaim the VAT charged to him/her on the purchase price. This is the reason why most, if not all investors would wish to continue with the 'opting in'.

Yes, I agree that this subject is highly technical and frought with complexities. In view of the amounts involved, getting professional advice is a must for any investor who buys commercial property as an investment.

Ramnik