Renting: commercial vs residential & VAT headaches

kfbowden

Hi Y'all,

I need some advice on renting, because until last Friday I was an excited 20 something looking forward to renting my first place on my own. Friday afternoon I receive an email from an estate agents saying rent +VAT. This has not been mentioned before and hadn't seen it advertised saying it included VAT.

Got home. My parents did their own investigation and found it in our local newspaper it was advertised as commercial. Checked out that the landlord can opt for this which is around 20%. This seemed a lot to be paying a deposit, rent, VAT and guarantor checks etc...

Did my own research and found out on Rightmove where I saw the property it said £xxxPCM. fees apply. No information saying it was a commercial property being rented out despite located above shops. I did not realise there were 2 kinds of rent, but also the estate agents never mentioned it was a commercial property being rented and despite we asked very clearly on our viewing about costs, fees etc...

So I compared the advert on Rightmove to the estate agents website - couldn't find it in either the commercial or residential section...Also I looked up the Consumer Act 2007 and other bits...have they not made the advert clear? Shouldn't it be clear across any type of advertisement that it is a commercial property and stated VAT is not included in the monthly rental fee?

This could be a rookie error on my part, but I am in my 20's and don't buy newspapers. I look everything up online and would have thought this VAT should be stated very clearly.

I may end up not getting the flat as it will be out of my budget and cost me £180.00 for guarantor check etc... Luckily I have not signed the tenant agreement.

Any advice welcome and what would the next steps be?

Thank you in advance.

anselld

If it is a commercial premises then it may not be occupied for residential use (breach of planning regulations).

If it is a residential premises then VAT cannot be charged.

Check with the Local Council to see if they recognise the property as a legitimate residential use. If it is residential get the agent to sort out the correct VAT rating. If it isn't then report them to the planning department and look for somewhere else to live.

G_M

Are you intending to use the property as a shop? Or to run some other business? If so, as Anselld says, VAT is chargeable. And the property must be designated by the council Planners as 'commercial use'.

If you intend to live there, it should be designated as 'residential' and VAT should not be charged.

Miss_Samantha

I don't think the commercial v. commercial lease is relevant.

The starting point is obviously whether the landlord is registered for VAT. Then, the landlord must also have opted to tax since rental payments are generally exempt.

In any case, if the rent was quoted to you as "£x pcm" it meant inclusive of all tax. If they want to move the goal posts now you are entitled to walk away and to get all your money back (if you already paid anything).

anselld

Miss_Samantha wrote: »

I don't think the commercial v. commercial lease is relevant.

The starting point is obviously whether the landlord is registered for VAT. Then, the landlord must also have opted to tax since rental payments are generally exempt.

In any case, if the rent was quoted to you as "£x pcm" it meant inclusive of all tax. If they want to move the goal posts now you are entitled to walk away and to get all your money back (if you already paid anything).

The option to tax only exists for commercial lets, not residential.

booksurr

it is more likely to be classed as a mixed use premises , commercial below and residential above. Not foolproof, but a reasonable indication of mixed use would be to check its council tax listing. The shop will be subject to NNDR (business rates), the flat/accommodation will be subject to council tax.

as such the option to tax can only be applied to the commercial part - assuming of course that the landlord hasd indeed exercised the option. If they have then VAT must be charged on the portion relating to the commercial part, if that means a single rent figure has to be apportioned into a VATable commercial rent figure and a non VATable residential rent figure then apportioned it must be because once an option to tax is done it remains in force for at least 20 years or until the building is sold and the new owner can choose whether to opt to tax or not.

Although OP is right to say the advertising must categorically state if prices are incl or excl of VAT, that only applies where the end customer is reasonably expected to be a consumer, so does not apply in the case where the customer is a business. I agree that even businesses might be caught by an unexpected option to tax, but unless they are not VAT registered themselves, it would have no effect on them for obvious reasons. Therefore, where the advert provides a single rent figure that in reality relates to a mixed use property, I do think OP has a germ of a case for misleading advertising

CIS

To check the property is listed as domestic for council tax purposes look here - https://www.gov.uk/council-tax-bands

Craig