For any business or organisation that is either not registered for VAT or is registered but partially exempt, then VAT paid on overheads will be a cost to the business. A major overhead is usually the rent of an office or other trading premises, where the landlord will often charge VAT because they have opted to tax their interest in the building.
However, there is potential good news for tenants: if a landlord opted to tax their interest in a building more than 20 years ago, they can revoke it in most cases by submitting form VAT1614J to HMRC. Future income they earn from the building – rent and selling proceeds – will be exempt from VAT.
The priority is to ask landlord if they made their election more than 20 years ago – tenants could perhaps offer to pay some extra rent as an incentive. The option to tax rules were introduced in 1989, so many elections have been in place for more than 20 years and can be revoked.
If you need any assistance in reviewing premises rent, we are here to help on 01384 376964.
Folkes Worton LLP Chartered Accountants
Accounting for the Future