Tax Issue

[ash-sp]

I am self-employed & VAT registered as the turnover on my company is above £62,000 per annum. As I shall be running my holiday let as a business, do I need to charge paying guests VAT? Or would the Holiday let be classed as a separate business for VAT (and other tax) purposes?

Thanks,
Ash.

[Mountain Goat]

Ash, hi

a) Get advice from a qualified accountant.

b) Talk to HM Customs and Excise - they have an anon. enquiry telephone service.

c) My feeling is it depends whether your company's business is related to your rental property (or property investment/conversion etc.) and also which country your property is located. Having taken professional advice, it may be worthwhile (financially) connecting the two operations to give one operating front for tax (and/or VAT); on the other hand, it may not. Great answer.

MG

[squirrel]

Hello Ash

Agree with above, get advice from an accountant.

I believe that in the UK for VAT purposes it is the "person" who is VAT registered. If you are a self employed VAT registered sole trader then your rental charges will also be liable to VAT, it does not matter whether your existing type of business has any connection. You will of course be able to reclaim any VAT incurred on legitimate expenses for the rental property but you are likely to be on the losing side.

If your existing VAT registered business becomes a limited company then that side becomes a different "person" and you will become an employee of that "person". You can then still be a self employed sole trader for the rental property and not liable to VAT. Or you can do it the other way round. Alternatively the rental property income could be in the name of another "person" (wife, partner etc).

A lot depends on your existing business set up and whether or not you are happy to account for VAT on your rental income. It's a bit of a minefield so take good advice beforehand.

Best of luck

[Mountain Goat]

If you are a self employed VAT registered sole trader then your rental charges will also be liable to VAT, it does not matter whether your existing type of business has any connection.

Squirrel, hi, I have to gently disagree. Revision - strongly.

I've been VAT registered as a sole trader for 15 years, and also VAT registered with Mrs G in partnership for 12, and have a capable accountant who deals with our rental income who hasn't even hinted in our darkest moments there's any VAT liability regarding property activities. In the back of my mind I've a feeling that rental income isn't liable to VAT at the standard rate anyway unless other services are provided. I would ask him, but at £75 a shot it will have to await a passing generous professional, and sitting on a ski-lift I can't phone UK VAT.

In fact trying to think it through, the VAT reg. would be a pain and a waste of time - the input VAT claimable would be negligible and the output VAT at 17.5% would be distinctly unattractive to punters and immediately make our property activities uncompetitive for no apparent gain (UK, not Switzerland which is 'outside the scope' in the jargon).

However, knowing nothing, and not being an accountant, I would advise ignoring my mini-rant above. If you're right we need a new accountant fast; about time anyway, his charges are eyewatering.

MG

[squirrel]

Hi GG

Everybodys set up is different. Having developed the holiday rental business through a VAT registered business partnership originally we were able to claim input VAT on the capital costs by zero rating for new build but then had to account for VAT on rentals for 3 years before we were able to split the businesses into different entities.

As I said every set up is different so good advice needed.
Must rush off now and do the VAT returns!!

[Alan Knighting]

It all adds up to one thing. No matter which country you are based in you need professional advice. OK there will be a bill to be paid for that advice but, are your services given away for free any more than those of an Accountant or a Lawyer?

Fluffy