If your business’ turnover is above the £85,000 threshold you have to register for VAT and subsequently charge it for all goods and service rendered that aren’t zero-rated. But if you had the choice, would you charge VAT at all?
Too hypothetical? Well, no. The letting of property is exempt from VAT, but when letting commercial property you can elect to charge it, namely you’ve taken the ‘option to tax’.
But why would you take the option if you don’t have to? Well, for example, it makes it possible to recover VAT you may have been charged on the purchase price and recover VAT on renovations and on-going costs. But there’s always a downside. Take for instance the higher costs incurred by your renter if they’re unable to claim back the VAT. You could well be pricing yourself out the market.
It pays to get advice from someone who likes tax when dealing with your business’ tax position. This especially true for the ‘option to tax’. If you elect to charge VAT, and subsequently find yourself at a disadvantage, you’re unable to revert back for 20 years. It really is something you want to be sure about, and to be sure you should have an accountant who likes tax.
Find your local AIMS Accountant today.