Boring Tax/VAT question

[NDA]

If you rent out a few properties and the income is, let's say £50k a year, should you become VAT registered and, if so, what are the advantages?

[JagLover]

NDA said:

If you rent out a few properties and the income is, let's say £50k a year, should you become VAT registered and, if so, what are the advantages?

Renting out private housing is not a taxable supply, commercial property is.

[Ali_D]

NDA said:

If you rent out a few properties and the income is, let's say £50k a year, should you become VAT registered and, if so, what are the advantages?

Normally no.

[NDA]

OK - thanks.

[Eric Mc]

The default setting for rental income is that it is exempted from VAT. That means that even if your rental income was in the millions, there would be no obligation to register for VAT. However, there is an "Option to VAT" regarding property income.

Why, I hear you ask, would anyone in their right mind register for VAT when there is no obligation to do so? Well. there are often occasions when a builder or landlord expects to be expending a lot of costs on a particular property and they would like the option of being able to recover the Input VAT on those costs. They therefore might take the Option to VAT route if this is the case. It actually makes real sense if the property you are renting out is a commercial property and the tenants are VAT registered entities and therefore able to recover the VAT you are charging on the rents you are charging them.

[NDA]

Useful info Eric, thanks....

In my case it's probably not worth it - but I was curious.

[Eric Mc]

Are you a VAT registered trader and would this rental income be part of your overall VAT registered tarding activities?

[NDA]

I'm not VAT registered and the VAT I would pay on the houses I rent (for various services/maintenance/fees) would be around £6-7k.

[Eric Mc]

Then I wouldn't bother.

There are problems for VAT registered traders who have a mix of both VATable sales and VAT Exempt sales. They could end up finding that the recovery of their Input VAT was restricted.

[NDA]

Advice taken!

Thanks for pondering.

N

[Wings]

NDA said:

Advice taken!

Thanks for pondering.

N

Surely no residential landlord would want to add 15% VAT on to their tenant’s rent, when other residential landlords in your locality were not doing the same, making your property less variable to potential tenants to rent.

Perhaps as a landlord you should look at the tax rules/issues for both refurbishing and renting out property.

[Steamer]

Just bring this back up a second, sorry for the hi-jack.

I'm Vat reg. as a sole trader - but am also thinking about taking in a lodger soon.

Its been mentioned that rent money is VAT exempt - so it shouldnt effect my VAT returns each quarter then? but I will be declaring it as part of my TAX return as additional income?

I'm only in the planning stages - hence why I thought I'd tag along on this thread.

[NDA]

Wings said:

NDA said:

Advice taken!

Thanks for pondering.

N

Surely no residential landlord would want to add 15% VAT on to their tenant’s rent, when other residential landlords in your locality were not doing the same, making your property less variable to potential tenants to rent.

Perhaps as a landlord you should look at the tax rules/issues for both refurbishing and renting out property.

You're right.

I'm an accidental landlord having ended up with several properties I can't sell and I've not really researched the subject very much.

[Wings]

If residential lodger, then no need to include the lodger's rent/income on your VAT return or business accounts, see link

http://www.hmrc.gov.uk/manuals/PIMMANUAL/pim4001.h...

[Eric Mc]

Steamer said:

Just bring this back up a second, sorry for the hi-jack.

I'm Vat reg. as a sole trader - but am also thinking about taking in a lodger soon.

Its been mentioned that rent money is VAT exempt - so it shouldnt effect my VAT returns each quarter then? but I will be declaring it as part of my TAX return as additional income?

I'm only in the planning stages - hence why I thought I'd tag along on this thread.

VAT

Rental income is INVESTMENT income so would not normally be included as part of your trading income. Therefore, it should have no impact on your VAT situation. However, there are odd situations where it might, for example, if you started renting out a part of your business premises.

Income Tax

Normally, rental income would be included as part of your annual Self Assessment tax return. However, if you are letting a room in your main residence to a lodger, you can make use of the Rent-a-Room scheme which allows you to ignore this rental income for tax purposes if it is below £4,250 per annum.

Edited by Eric Mc on Monday 9th March 18:17

[siscar]

Wings said:

NDA said:

Advice taken!

Thanks for pondering.

N

Surely no residential landlord would want to add 15% VAT on to their tenant’s rent, when other residential landlords in your locality were not doing the same, making your property less variable to potential tenants to rent.

Perhaps as a landlord you should look at the tax rules/issues for both refurbishing and renting out property.

It only makes sense usually if the people you are renting to are VAT registered - which does happen, some companies rent property to accommodate staff who are relocating or usually based elsewhere.

[Steamer]

Eric Mc said:

Steamer said:

Just bring this back up a second, sorry for the hi-jack.

I'm Vat reg. as a sole trader - but am also thinking about taking in a lodger soon.

Its been mentioned that rent money is VAT exempt - so it shouldnt effect my VAT returns each quarter then? but I will be declaring it as part of my TAX return as additional income?

I'm only in the planning stages - hence why I thought I'd tag along on this thread.

VAT

Rental income is INVESTMENT income so would not normally be included as part of your trading income. Therefore, it should have no impact on your VAT situation. However, there are odd situations where it might, for example, if you started renting out a part of your business premises.

Income Tax

Normally, rental income would be included as part of your annual Self Assessment tax return. However, if you are letting a room in your main residence to a lodger, you can make use of the Rent-a-Room scheme which allows you to ignore this rental income for tax purposes if it is below £4,250 per annum.

Edited by Eric Mc on Monday 9th March 18:17

Brilliant!

Many thanks

[Wings]

siscar said:

Wings said:

NDA said:

Advice taken!

Thanks for pondering.

N

Surely no residential landlord would want to add 15% VAT on to their tenant’s rent, when other residential landlords in your locality were not doing the same, making your property less variable to potential tenants to rent.

Perhaps as a landlord you should look at the tax rules/issues for both refurbishing and renting out property.

It only makes sense usually if the people you are renting to are VAT registered - which does happen, some companies rent property to accommodate staff who are relocating or usually based elsewhere.

Agree, but would a landlord want to go down that road of registering for VAT, why, as a landlord restrict oneself to only VAT registered tenants?