VAT on properties as a sole trader

MisterCrown

Hi there.
I cannot get a straight answer from the revenue on this query. I starting a small business as a sole trader. I have registered the business name and I wish to register for vat under the business name.

However I am worried if I register for vat that I could become liable to charge vat on apartment that I rent to individuals. Could this happen? Is it possible to keep the sole trader register for vat while keeping rented properties out of the vat net? Any guidance would be appreciated. Btw I know a ltd company could solve the dilema but wish to keep sole trader status for the first couple of years.

Any help appreciated.

MBateson

It shouldn't affect your apartment rents. Residential lettings are VAT exempt normally.

ronaneire

VAT only applies to commercial properties.

nompere

ronaneire wrote: »

VAT only applies to commercial properties.

That will come as a surprise to every builder (or at least those still trading) who sells a new house and charges VAT on the sale. The VAT generally isn't recoverable, but it still gets charged.

As a general principle any lease of property since 1 July 2008 is exempt from VAT - but as an equally general principle almost any commercial lease is brought back within the charge to VAT as it mostly suits the lessor to do this and the lessee is generally unconcerned.

ronaneire

nompere wrote: »

That will come as a surprise to every builder (or at least those still trading) who sells a new house and charges VAT on the sale. The VAT generally isn't recoverable, but it still gets charged.

As a general principle any lease of property since 1 July 2008 is exempt from VAT - but as an equally general principle almost any commercial lease is brought back within the charge to VAT as it mostly suits the lessor to do this and the lessee is generally unconcerned.

Correct me if I am wrong! We are talking about VAT on rental income and not purchases. There is no VAT applied to the rental income on residental.
However there is VAT on rental from commercial properties and this came actually came in, in 2008.
So where are you coming up with there is no vat on commercial?

nompere

You made a bald statement about VAT only applying to commercial properties. The statement, taken on its own, was incorrect.

It is still incorrect in relation to the letting of commercial properties. The rules changed in 2008. This is a short quotation from the current Revenue guide:

2. Lettings are exempt from VAT

Lettings are exempt supplies of services for VAT purposes. A landlord who makes an exempt letting is not entitled to deduct VAT incurred on the acquisition or development of a property, which is subject to the letting.

A landlord may opt to tax a letting.

You will note that there isn't a distinction made between commercial and residential lettings. You can read the whole thing here:

http://www.revenue.ie/en/tax/vat/leaflets/property-guide/letting-property-new-system.html#s2

It is, of course, to receive a credit for the VAT that landlords may opt to tax lettings. Tenants who are registered for VAT will generally allow this option to be exercised.

mathepac

MBateson wrote: »

It shouldn't affect your apartment rents. Residential lettings are VAT exempt normally.

Guys you are now involved in a seriously off-topic pi**ing contest, OP has his/her answer.

Commercial properties, builders sales, etc are not part of the original query.

sawilson2003

There is no option to apply VAT on letting of Residential Property. The option applies to letting of Commercial properties ONLY.

Bullseye1

ronaneire wrote: »

VAT only applies to commercial properties.

Do you have to charge Vat on commercial properties. I am renting an office but there is no vat on the bill.

sawilson2003

No the Landlord has the option to charge VAT, doesnt have to. The landlord has to notify the tenant in writing that the letting will be subject to VAT

Alan Shore

@MisterCrown, no need to worry VAT will not apply to your apartment. The fact that you have registered for VAT will have no impact on your letting of property. The trade and rental are treated differently for VAT purposes.

As the previous posters have said the letting of residential property is an exempt activity with no option to tax the letting. Hope i have not upset anyone with what I've said.

MisterCrown

Thanks everyone.