vat on rental

lizzy Registered Posts: 36 Regular contributor ⭐
i am bookkeeping for a company & want to refresh my mind on vat on rental, am right that if you opt to tax commercials you can reclaim all input tax but cannot claim any on residential
many thanks


  • T.C.
    T.C. Registered, Tutor Posts: 1,448 Beyond epic contributor 🧙‍♂️
    If you are talking about rental properties, then no you can't reclaim VAT on any rental properties, works carried out etc. You should look at partial exemption.
  • K H
    K H Registered Posts: 81 Regular contributor ⭐
    this is quite a complex area, but basically assuming you are renting out both residential and commercial and you opt to tax the commercial property ,then you are subject to the partial exemption rules.

    you can reclaim the input tax in full on supplies which relate directly to vatable supplies but can only reclaim in full the input tax for exempt supplies (residential) as long as your exempt input tax is not above the de minimus limits., and a seperate calculation has to be made for 'residual input tax' (overheads)

    the de minimus limits are that the exempt input tax is not above £625 per month on average and not more than half your total input tax in the relevant period.

    an annual adjustment has to be made to ensure you are keeping to these limits.

    opting to tax is not always a good idea though as i have dealt with clients that have opted to tax small shops which then made the rents too expensive for small non vat registered businesses, and bear in mind that vat will have to be charged if the property is eventually sold.(with certain exceptions).

    K H
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