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how do i deregister for vat

VAT on lease of commercial property

Sun, 20/11/2011 - 17:57 — admin

VAT on lease of commercial property

Hi Mustangu

Unfortunately that's not how it all works. You can if you wish deregister from VAT as your turnover will be beneath the VAT threshold, however you will have to repay the VAT that you claimed on the purchase price of the property to HMRC. The rule applies to any goods that you have on hand at the date of deregistration. see HMRC's guidance on the subject here .

So you basically have two choices: remain registered and charge your tenant the VAT on top of the existing rent; or alternatively to deregister and repay the VAT to HMRC and charge your tenant a higher rent to take into account the fact that you had to refund the VAT to HMRC.

I would be careful about deregistering too quickly: I appreciate that the prospective tenant isn't registered for VAT, but you may find other tenants in the future who are registered and would be able to recover the VAT that you would have to charge them on the rent. Depending on the purchase price of the property, it may be possible to reregister at a later date and

claim back some of the VAT. In principle, your option to tax would remains valid for 20 years when you can can cancel it. So if you become registered at a future date because of any other business activities, and subsequently make any further supplies of the property, such as leasing to a different tenant or the freehold sale during that time period, you'd have to charge if you simply want to deregister and not have to worry about VAT.

It is possible to revoke an option to tax within six months if certain conditions are fulfilled: see HMRC VAT notice 742a, Section 8 This would certainly make life easier as although you'd have to refund the VAT you paid on the purchase price to HMRC, it would mean that you don't have to add any VAT to the rents or sales proceeds at any point in the future.

The option to tax is a complex area VAT and obviously I can only point you in the direction of the general rules here. But it does seem that there are two options; either remain registered and charge VAT on rent or other income in the future OR deregister and repay the VAT to HMRC, revoking the option to tax if possible.

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