VAT planning - rented property Gwent : Green & Co

VAT planning - rented property

Farmers often let out property or storage facilities and need to ensure that VAT is charged and reclaimed correctly.

If you are VAT registered and rent out an outbuilding for use as storage, this is now a standard supply and you will have to charge VAT. This isn't a problem if you are renting to a VAT registered person, and it does mean that you can reclaim VAT on all repairs and maintenance.

If you let a cottage or converted barn for residential use, you are making an exempt supply so you do not charge VAT. This usually means you can't reclaim any VAT on expenses relating to the rented property.

However, as farmers, you also make standard-rated or zero-rated supplies, such as livestock sales and crop sales, so you are considered partly exempt. This means that if you pass one of the 3 de minimis tests set by HMRC you would be able to reclaim this VAT.

To run the tests, you will need to ensure that you keep a separate figure for the rental income and separate figures to show:

  • the VAT on expenses relating to the rented property;
  • VAT on expenses relating to your standard supplies; and also
  • VAT on expenses relating to a mix of both supplies.

Although this can become quite complicated, it is worthwhile doing the tests, otherwise you cannot claim any of the VAT! This will be even more critical if you intend to do repairs on the property, as you could potentially recover up to £7,500 VAT in one year. 

The VAT team at Green & Co are extremely experienced and are always here to help, so please contact us today to find out what we can do to help you.

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