VAT & Partial Exemption

Jan Registered Posts: 654
Slight disagreement at work. Client is newly VAT registered, rents out houses 0% as well and farms/land etc @ standard rate so partial exemption rules apply.

Any thoughts on this scenario:-

We recharge the cost of boiler servicing to the tenant, previously the gross amount of the supplier invoice. We cannot re-claim the VAT on the supplier invoice, as there is no VAT on the house rent, so the cost to us is still the gross amount. Do we then charge VAT on top of that, in which case it would increase the cost to the tenant by 20%, or do we add 20% to the net cost to us, in which case we won’t be repaid what it has cost us.

Phew, I hope that makes sense.

Thoughts and where can I find it chapter and verse on HMRC website???


  • T.C.
    T.C. Registered, Tutor Posts: 1,448
    It the charge to the tenant is through the business then you would charge VAT (and hence reclaim VAT). This is unusual though as boiler servicing is normally done by the landlord. I operate a partial exemption scheme with a builder who carries out general building works as well as rent out houses. It is quite straight forward once you get your head around it. Good luck.
  • Rozzi Rainbow
    Rozzi Rainbow Registered Posts: 465
    This sounds like a disbursement, for which there are special Vat rules. See if this link is of any help:

    These are just my thoughts, but I would say your client charges the tenant exactly what the supplier has charged them (i.e. net amount plus Vat), it's then up to the tenant if they can reclaim that Vat or not. I would say your client could reclaim the Vat charged by the supplier, to offset the Vat payable on their invoice to the tenant, as the purchase is entirely for the taxable supply made. See also this link re partial exemption:
  • Jan
    Jan Registered Posts: 654
    Thanks to you both. TC it is in tenants contract that they pay for servicing, land lord arranges for it to be done and pays for parts & certificate. I also contacted the accountant who does the accounts, I only do bookkeeping & VAT returns. Reply was to not charge VAT as cost is part of the exempt tenancy so just charge the gross amount it has cost landlord.
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