This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our privacy notice.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Marketing

A bit of data which remembers the affiliate who forwarded a user to our site and recognises orders from those who become customers through that affiliate.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Gross or net rental income in the VAT calculation?
I have a client who is registered for the flat rate VAT scheme and has a little bit of rental income which is also included in turnover to calculate the VAT due to HMRC. He has a letting agent and I am wondering if I have to include the gross rent or could I use the net rent for inclusion for the purposes of the flat rate calculation? 
 
Arthur Weller replies:  
If you look at HMRC’s VAT Notice 733 (www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-small-businesses) at section 6.2 second bullet point, you can see that the value of any exempt income, such as rent, is included in flat rate turnover. If you look in section 9.4 there, which deals with cash-based turnover, you can see that if a net payment is received, the full value before any deductions is included in the scheme turnover. See there in the second bullet point that 'where commission or payment for expenses has been deducted by a factor or agent collecting money on your behalf' is an example of needing to include the full value. 
 

This question was first printed in Business Tax Insider in March 2019.

Tax Insider Lite

FREE tax strategies delivered to your inbox every month.

  • By clicking on the button below you agree to the terms & conditions and the privacy notice of the website.
  • Subscribe for FREE