VAT on sub letting

I am looking at the possibility of taking out a lease on a new property where the current landlord has opted to charge VAT I am currently near the VAT threshold and taking a larger property will probably take me into registration for VAT. I am ok with this but I currently sub let 5 different areas in my current property. My query is this. Do I have to charge VAT on the rent for the tennants who sub let part of the new property if I did take it as become vat registered.

Hi,

If you sub let commercial property then this would normally be an exempt supply for VAT purposes.

If you want to be able to charge VAT then you would have to submit an option to tax for a specific property.

If you take out a lease on a new property and the landlord has taken out an option to tax then you would need to submit an option to tax if you want to be able to reclaim the VAT which the landlord has charged you. This would then require you to charge VAT on the rent to your tenants

Please see the guide below:

The scope of an option to tax

Thank you.

Many thanks for this. I think I've understood you correctly but could you just confirm one point The landlord has opted to tax. Can I register for vat on my sales and claim back the vat I am charged by my landlord on the rent but also choose to opt out of charging vat on the rent to my tenants. My tenants are mostly retired people who buy an sell antiques and collectables to stay busy, not to make a small profit. I am worried the vat charge may take them into a loss. To summarise. Can I register for vat on my sales of antiques but opt out of charging vat to my tenants on thier rents even if my landlord has opted to charge vat on the rent I hope this makes sense Rob Rosewarne

Hi.
If you opt to tax the property to be able to recover the VAT which the landlord charges you then you must also charge VAT on your rent to your tenants.
This is the requirement of an Option To Tax.
Please see guidance below:
The scope of an option to tax

This is where I am confused. Is opting to tax separate from registering for vat on my sales Can I opt not to tax on my rental income and not claim the vat back I am charged by my landlord. Then there will be no vat on the rent I charge my tenants. But can I still then register for vat on my sales and claim back vat on my costs Are these two sepearate regulations Regards Rob

Hi Rob Rosewarne,

Yes an Option To Tax is completely voluntary.
If you choose not to Opt To Tax then it just means that you will not charge VAT on your rent and you won't be able to reclaim the VAT on the rent charge you incur from the landlord.
You can still register for VAT on the basis of selling goods.
It would mean that you would charge VAT in relation to the goods you sell but you would not charge VAT to your tenant for the rent as there would be no Option To Tax made on the property by yourself.

Thank you.

I'm nearly there now. I've another small query. I'd like to take payments for my tenants. It's seem sensible to have one card reader rather than upto 10. If I take payments and transfer to the tenant later that day or the next day less the merchants fees would this be free of VAT as I won't be charging them for this. It's just to cut down thier overheads. Rob

Hello
Yes as long as you keep a clear record of your exempt sales.