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VAT Reminder To Landlords And TenantsVAT Reminder To Landlords And Tenants

» Posted on: 16 December 2009
» Posted by: Barry Challender
» Service area: Commercial Property

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A reminder that on 1 January 2010 VAT will return to the old rate of 17.5%.

Landlords, who are charging VAT on rents for their commercial leases where the period of supply spans the change over will be able to select either to charge VAT at the rate of 17.5% or at 15% as the tax point date in that case will be the date of the landlords invoice to the tenant. If the landlord decides to charge the rate of 17.5% he will have to apportion the value of the supply between the period prior to 1 January 2010 at the old rate of 15% and the period 1 January 2010 onwards at the new rate of 17.5%.

If the landlord receives rent in advance from the tenant prior to issuing his VAT invoice and that payment is received before 1 January 2010 then VAT will be at the rate of 15%. The tax point date in this case is the date the landlord.

For those tenants who are not registered for VAT, but are having to pay VAT on rents, they should consider whether or not it would be to their advantage to pay the rent in advance for the period which spans the changeover date if that payment is paid in advance of the landlord’s invoice. Tenants considering this course of action however should bear in mind that HMRC are introducing anti-forestalling provisions which will create an additional 2.5% charge where HMRC consider that the supply is being paid far before the changeover date outside normal trading patterns in order to obtain the benefit of the reduced rate.

Where rent is payable in arrears and spans the changeover date, the landlord will have the same option to apportion the rent at the different rates over the period of supply or charge VAT at the rate applicable at the tax point date which in that case will be 17.5%.

If you have any queries on this or any other matters relating to landlord and tenant issues contact Barry Challender on 01254 297912.

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