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Posted Fri, 25 Aug 2023 05:28:49 GMT by
Hi there, if a vat registered Ltd company selling goods online, acquires a residential property to rent out as a different source of income, is the rental income then charged to vat also? If we havent opted to tax and dont want to, should the rental income automatically be charged to Vat since the Ltd company is vat registered or will the vat only apply to the main trade of the business? Thanks
Posted Tue, 29 Aug 2023 07:53:24 GMT by Jason Croke
Depends. If you are renting the dwelling long-term, then it will be an exempt supply. You cannot opt to tax a dwelling. However, if you are renting the property on short term/holiday lets (AirBnB), then these supplies are automatically standard rated. You therefore need to be clear whether you are renting a home long-term or renting a holiday let short-term. There are also other direct tax implications depending on which you choose. If you are making long-term rentals which are exempt, you are required to perform a partial exemption calculation to determine whether or not you can reclaim input tax relating to the property rental business. The right to reclaim VAT is only ever on the basis you make taxable (VATable) sales, so where you don't make VATable sales, your entitlement to reclaim VAT is potentially restricted. Any business involving property should really involve seeking proper advice to ensure that you are exploring all the tax risk and opportunities.
Posted Wed, 30 Aug 2023 14:10:00 GMT by HMRC Admin 19

If a business rents out reseidential premises then this is exempt from VAT and so VAT cannot be added to the supply whether the supply is the the main trade or not.

An option to tax can only be used for a commercial premises where the opter wants to charge VAT on the rent to the tenants. You can see guidance here:

The liability of a supply of land

The scope of an option to tax

Thank you.

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