VAT on Ground Rent

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    VAT on Ground Rent

    Hello everyone,

    I'm thinking of buying a holiday chalet with about 50 years left on it's lease. The Vendor has supplied me with some paperwork including Ground Rent and Service Charge demands. I notice that the Landlord is charging VAT on the Ground Rent but not the Service Charges and was wondering if this was legit, I always thought Ground Rent was VAT exempt?

    Any advice gratefully received.

    #2
    Are you buying a leasehold property which started with 99 years lease ?

    VAT is a requirement for businesses which have annual turnover exceeding £85K

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      #3
      The chalet was built in 1970 with a 99 year lease. The Freeholder (Landlord) doesn't charge VAT on the maintenance/service charges but does with the Ground Rent, I'm confused!

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        #4
        If the freeholder is a company receiving over £85K income , it has to register for VAT and charge VAT..

        The administration of service charge account under the 99 years lease includes cost of annual maintenance for the buildings and contribution to insurance, are charged as cost to the leaseholders. So no VAT is charged on the service charge levy.

        https://www.taxinsider.co.uk/recharg...d-vat-be-added.

        The lease on the chalet has only 48 years remaining and if the building is in good condition, you should consider paying for statutory lease extension.

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          #5
          Vat is only normally payable on commercial leases, perhaps this is defined as such.

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            #6
            Do you pay residential council tax or business rates on the property

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              #7
              The Council Tax is zero rated. It's only a small chalet on a holiday park. No business rates either.

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                #8
                Does the property title at Land Registry show it is residential property or commercial property ?

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