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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15976
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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This is a question about VAT and if its chargeable. If a lettings

Customer Question

This is a question about VAT and if its chargeable. If a lettings agent is charging an application fee for a tenant does it have to have VAT added. The application fee is to cover tenant referencing, including credit check, employment confirmation and previous landlord. Also it covers the administration of these checks.
I see that some agents do add vat to this fee and some dont, so assume that some see it as a vatable charge and some dont.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

The fees charged to prospective tenants by letting agents are standard rated (VATable at 20%) administration fees that they charge to cover their costs though many say that the landlord should pick up the bill. Agents usually charge the landlord set up fees too so you could say that the agent is getting paid twice for the same work. On the other side is the argument that charging a fee to a prospective tenant puts off the time wasters.

If you have seen agents not charging VAT on tenant application fees, they are either displaying their charges incorrectly by not mentioning VAT or they are not registered for VAT. A business does not need to register for VAT unless its turnover has exceeded £81,000 in the last 12 months it is expected to do so in the next 30 days.

Take a look here for some information on a proposal to ban letting agents from charging prospective tenants fees.

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