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bigduckontax
bigduckontax, Accountant
Category: Tax
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If a company rents out residential and commercial properties

Customer Question

If a company rents out residential and commercial properties are there vat considerations?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
Normally rentals are exempt from VAT [see https://www.gov.uk/rates-of-vat-on-different-goods-and-services]. They can, however, have VAT applied, but this creates a problem for the company for when the firm comes to sell then VAT must be charged on the selling price which, I am sure you will appreciate, adds 20% to the cost to the buyer. All very well if the purchasing organisation is registered for VAT, then it could reclaim the tax as an input, but if the buyer is not so registered than a 20% price hike might make the sale of the property un-competitive. Only the very biggest companies run rentals through the VAT regime and even then very few do.
I do hope I have helped you with your query.

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