Letting Agent now charging VAT

Pinksnowflake

I am letting a property through a Letting Agent and this months invoice from them has had VAT charged on top of my usual fees. I am assuming this is because they have now hit the VAT threshold, but I had no notice of this. I have been hit with extra costs I was not expecting. Can they do this without any notice? Thanks in advance.

jjlandlord

It is not a question of notice, but rather of the agreed fee for their service.

How is the fee defined in your contract with them?

silvercar

The short answer is yes. Though it would have been polite to notify you. VAT is a government directive, so they have no option. Your choice is no whether to continue with them or go elsewhere.

If you were registered as a VAT charging business yourself, you would claim the VAT back and it would make no difference to you.

jjlandlord

silvercar wrote: »

The short answer is yes. Though it would have been polite to notify you. VAT is a government directive, so they have no option.

This is not the issue here.

If the contract is that their fee is 10% of the rent (for example) then that is what OP is liable to pay, and it does not matter whether the agent is registered for VAT or not.
In this scenario, if they become registered for VAT then the 10% will include VAT and the agent will receive less. They cannot add VAT on top of it.

Hence the question of my previous post.

Marktheshark

The Profit margin on rental property is about 11% per year on average.
That is if you are good at it.
Some make more, some make less.
Once you use a Letting agent, that percentage is eaten in to or wiped out very quickly.
It might seem a small fee in relation to rent paid, but when you take the agents fees as a percentage of the net profit, you soon see that someone who has not laid out any investment capital is now harvesting your profit whilst you foot the bill.

Recalculate what profit you are making, ignore capital increase on property value as this is gained on a Empty home as well.
So work out rental profit only as a percentage of investment above what other do nothing investments pay.
Then factor the agents fees.

Often you are left a bit miffed that someone else is harvesting your profit, you might even be losing money on the deal and then you realise you need to do the job yourself if you are going to make any money.

Then you see why so many management agents spring up, they only need an office and telephone to harvest the profits of buy to let owners.

TartanSaver

I thought this was going to be a totally different topic. I once rented a property where the letting agent obviously couldn't be bothered trying to justify keeping the deposit (because there was no justification.) They increased the entire amount they were claiming for by 17.5% for VAT, including for rent arrears (not VATable, obviously), cleaning services (where the receipt already included VAT), repairs which were the LL responsibility (and had been notified) and various other things. Frankly it had crossed the threshold into fraud because clearly HMRC was going to see none of that "VAT."

vintagebrighton

TartanSaver wrote: »

I thought this was going to be a totally different topic. I once rented a property where the letting agent obviously couldn't be bothered trying to justify keeping the deposit (because there was no justification.) They increased the entire amount they were claiming for by 17.5% for VAT, including for rent arrears (not VATable, obviously), cleaning services (where the receipt already included VAT), repairs which were the LL responsibility (and had been notified) and various other things. Frankly it had crossed the threshold into fraud because clearly HMRC was going to see none of that "VAT."

Isn't VAT 20% anyway?

agrinnall

vintagebrighton wrote: »

Isn't VAT 20% anyway?

It is now, but it hasn't always been, had you read the post you responded to you would have seen that it referred to a time in the past.

TartanSaver wrote: »

I thought this was going to be a totally different topic. I once rented a property where the letting agent obviously couldn't be bothered trying to justify keeping the deposit (because there was no justification.) They increased the entire amount they were claiming for by 17.5% for VAT, including for rent arrears (not VATable, obviously), cleaning services (where the receipt already included VAT), repairs which were the LL responsibility (and had been notified) and various other things. Frankly it had crossed the threshold into fraud because clearly HMRC was going to see none of that "VAT."

Annie1960

I don't think they can suddenly start charging you VAT without notice. If a company charges VAT, they are supposed to tell customers this before presenting them with the bill - VAT should not be unexpected.

http://www.tpos.co.uk/downloads/TPOE22-2%20Code%20of%20Practice%20for%20Residential%20Letting%20Agents.pdf

See para 5k which relates to TPOS. Check what regulator your agent is registered with (they should have the logo on their stationery and website). Also check your contract to make sure this says nothing about VAT.

VAT registered organisations are supposed to always include their VAT number on their stationery, and are supposed to give customers a vat-inclusive price. The addition of VAT should not come as a surprise, as this removes your right to compare different quotes before agreeing to use their services.

vintagebrighton

agrinnall wrote: »

It is now, but it hasn't always been, had you read the post you responded to you would have seen that it referred to a time in the past.

Serves me right for skim reading in passing :rotfl:

ERICS_MUM

jjlandlord wrote: »

This is not the issue here.

If the contract is that their fee is 10% of the rent (for example) then that is what OP is liable to pay, and it does not matter whether the agent is registered for VAT or not.
In this scenario, if they become registered for VAT then the 10% will include VAT and the agent will receive less. They cannot add VAT on top of it.

Hence the question of my previous post.

I agree. :beer:

EM