VAT on rental income

mod81

Hi, I run a small business selling computers which is VAT registered.
I am considering moving house but rather than selling i was going to rent out my current house until the market picks up for selling. My question is though since i am registered with the HMRC for VAT with my business will i have to charge VAT on the rental income i get from renting out my house?

I am hoping i can create a new business thats not VAT registered just for the income from renting my house as its nothing to do with my computer business and the income from the rent will be well below the VAT threshold.
Is it possible to have two businesses one thats VAT registered and one that isn't?

dylanuk

The two would be considered as seperate businesses and the rental income would not count towards your VAT limit.

You don't need to set up another company, just submit the rental income in your self assessment.

Additionally any tax deductable expenses would be seperate too, e.g. you can only offset actual "house" expenses (repairs, mortgage interest, letting agent fees, etc..) against your rental income. You can't offset expenses from your computer business against your rental income or vice versa. The two are taxed seperately (although they do combine on your self assessment tax liability - e.g. if you take dividends from your computing company, you'd be taxed on these based on any other income you receive as well, e.g. salary and rental income if applicable).

Hope this helps!

chrismac1

Rental income is normally VAT exempt anyway under Schedule 9 Group 1. I say normally as there are innumerable exceptions and property as a whole is in my view the single most complex VAT area, VAT itself is the single most complex tax.

Hence the reason for quoting Schedule 9 Group 1. In the very unlikely event that your rental were to be either standard rated or zero-rated, assuming the same "taxable person" is doing the rental as is already registered, then the rent would count towards the £77k as part of your taxable supplies.

mod81

thanks for the info, fingers crossed i wont have to charge VAT on the rental income then as it would have meant my property would have been 20% more expensive than others in the area for me to be coming out with the same amount

Elaine_Wilson

I agree with Chrismac and you have nothing to worry about unless there is something strange about the rental income.

Technically, and for VAT purposes only, I think the rental business and your computer business will be treated as one. But, since rental income is exempt this is not counted towards your taxable turnover.

Of course, you must not reclaim the VAT on any expenses relating to the letting.

So effectively in your case they are treated as separate businesses.