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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15940
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My client has a fish and chip shop business and pays VAT at

Customer Question

My client has a fish and chip shop business and pays VAT at 12.5%. He also receives rent from a let property. Has that income to be included in his VAT return at 12.5%.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Is the property a residential property or a commercial property? Does your client run his business as a sole trader or through a limited company? If through a company, does the company own the property or is it owned by the individual?
Customer: replied 2 years ago.

The property is residential. My client runs his fish and chip shop in partnership with his wife and pays rent to a landlord. The let property is in the names of my client and his wife.

Expert:  TonyTax replied 2 years ago.

Thanks.

The rental income from the residential property should not be included in the VAT return for the business. It has nothing to do with the business.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Your answer is completely contrary to advice given to me by someone else in which I was advised that the rental income should be included in the flat rate scheme and VAT at 12.5% paid. Who is correct?

Expert:  TonyTax replied 2 years ago.

Only if the partnership is in the flat rate VAT scheme should the rental income which is normally exempt from VAT be included in the partnership VAT returns. The property is jointly held with your client's wife who is his business partner too so they are counted as the same business entity for VAT purposes.

The way to change that is to either change the business to a sole-tradership or change the ownership of the rental property to the sole ownership of your client or his wife, the latter being the more straightforward. An alternative option would be to incorporate the business.

Take a look here (under Calculating your flat rate turnover) and here for more information.