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05 April 2011
A client has opted to tax and charged VAT on rental income. Following letting to a VAT-registered business, the property is now being let to a charity which is saying that VAT should not be charged
My client rents a property to a charity. An option to tax election is in place on the property so 20% VAT was charged on the rental invoice. However the charity says this is not correct because of its charitable status.
Is it acceptable for my client to just show the charity number of the tenant on future sales invoices and not charge VAT?
The charity is adamant that a VAT charge is incorrect. If this is the case are there any potential input tax problems for my client if all rental income from the building becomes exempt rather than subject to 20% VAT? I want to be clear on these points because the amounts of tax involved are substantial.
My client bought the freehold in 2005 and there have been no past problems...
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