Buisness tariffs for residential properties

dunloadin

Can residential properties be on a business tariff, or is this frowned upon?

Just asking as I’ve fitted a few electricity meters into rented flats and owned properties that are supplied by the business side of the industry as opposed to the domestic.

Obviously there are tax issues….particularly for those renting who will have to fork out for the full whack VAT as part of the bill; and there is also less consumer protection, particularly when the contract ends and the supplier(s) pluck a new (and higher) tariff out the air come contract renewal time if the owner forgets to do so.

I'm pretty sure I read somewhere that residential properties should not be on business tariffs. Before I get on my high horse and mention it to my bosses I was wondering if any of you more enlightened folk out there know.

dunloadin

Clearly not

spiro

If the block of flats was on a business tariff and the landlord paid the bill and charged the customers he would have to charge them the domestic rate of VAT. He pays business rate of VAT which he claims back on his VAT return, he then charges customers domestic rate which he pays to HMRC.

dunloadin

Cheers for that Spiro, I can see what your saying and understand that, but they must have a big portfolio to get any benefit from being on business tariffs, and it must be a nightmare to make sure the contract is renewed on date.

There are a few other examples though...the family business that has three or four relatives who live in houses that are not in any way being used for business purposes (and are miles apart from each other). Small businesses and B&B's who dont earn enough to get a VAT number etc etc.

Farms where the barns and house have different meters but on the same MPAN I can understand but the rest seems a bit odd. Lots of domestic properties cant be used for business purposes in the small print of the insurance/mortgage/town planning docs (mine is), so will they be invalidated, just seems a bit strange to me.

Terrylw1

Hi Dunloadin.

This is a big problem for Suppliers as well. However, in terms of whether you are classed as business use the owner is responsible from the tax angle. Domestics cannot pay business VAT, CCL, etc.

To be classed as a business, it's not based on having VAT numbers or anything. If you are classed as profit making, you are charged at business rates no matter how small the business.

The tricky ones are those with a split of usage e.g. someone operating from home. You need slightly more specialist advice here but in all cases your accountant is responsible for this as well and should be able to advise you. I'm less up to date on the split element.

In terms of getting a business contract on a domestic property, it's not an issue to a Supplier. They can do either, very easily.

Contract renewal would be a pain unless they are classed as a group contract because then someone at the Supplier end will tie all the accounts together and manage them this way. This is norm for large companies, because they pay in one go and the Supplier then splits the payments across all the accounts. This involves the use of a group statement, attached to the front of all the bills.

Remember, businesses that consume at less than 34 units per day pay lower rate VAT but they are still classed as a profit making and should be billed as businesses.

dunloadin

Thanks for that Terrylw1, looks like another shade of grey I'll have to contend with when I'm out and about.