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VAT on Rented Properties

Fri 21 Jul 2017

A question often asked is whether there are any VAT implications for rented residential properties.

Generally the answer is no, because residential rents are exempt from VAT, so landlords are not able to charge VAT on rents and cannot therefore register for VAT. This prevents them from reclaiming VAT charged to them on expenses such as repairs.

However there is an exception to this principle. If a landlord is also in business and registered for VAT then that registration covers all business activities undertaken by that individual including the residential lets.

The standard or zero rated income from the business together with the exempt rental income may create a partial exemption scenario which could result in some or all of the input VAT incurred on property related expenses being claimed back within the business VAT return.

There are conditions however, mainly that the rental properties must be owned by the same person registered for VAT. So a sole trader could not, for example, include properties owned jointly with a spouse.

There are also financial limits to the amounts which can be claimed but if you think this may affect you then you may need to check with your accountant.

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