VAT Taxes - United Kingdom

Regulations/Tax Issues
21

There are certain circumstances where two businesses can be split up, especially if one is incorporated and the other is, say, a partnership.
I have heard this theory before that we are just collecting VAT on behalf of HMRC, and I think that is very much the case for business that buy something and then sell it on with added value - a window fitting company for example. They buy the windows including VAT, and sell the fitted windows for more plus VAT. They then claim back the VAT they purchased on the initial goods. It is pretty much a neutral situation and can help with cashflow. We, on the other hand, have to charge the market rates for our cottages and pods, and canā€™t add VAT. And we canā€™t claim much back because we donā€™t buy much in the way of materials - our biggest costs are finance (no VAT) and utilities (5% VAT). I try to claw back as much as I can, including on airbnb commissions, but it very much feels as though we are paying out our hard earned cash!

1 Like
22

Hi All,

As promised, here is the outcome from the meeting with our accountant!

Only the properties that have had 105 days or more used as a FHL are eligible for VAT. Due to the combined income being just above Ā£70k, this means that we will not be required to become VAT registered. We are looking at purchasing a few other Holiday Lets throughout the next tax year, so at some point it will become inevitable. Splitting the properties in to different entities may be one option out of having to pay Tax, however as the entities all lead back to the same owner, this isnā€™t a method that would 100% work.

My advice to anyone. If you are an individual, then do your best to keep the joint income from any FHL under 85k. If this cannot be helped, then prevent your properties from reaching the 105 days of use mark. This will stop you from becoming VAT registered. For businesses, we will just need to bite the bullet when the time comes. Look at it as an achievement that the property(s) is doing well enough to meet the threshold :slight_smile:

All the best,

Matt
Starbnb Holiday Home Management