Frequently Asked Question

Charging VAT when Recharging Insurance to Tenants
Last Updated about a month ago

A landlord pays insurance for a property. The insurance company does not charge VAT - Insurance is VAT exempt.

He now recharges this cost (Service Charge) to the tenant for a Unit that is VAT registered (such as when VAT is added to the rent charge).

Question: Does he need to add VAT?
Answer: Yes.

There seems to be much confusion on this matter. We have even received copies of advice from accountants that there is no VAT as Insurance is exempt.

Such advice is wrong.

Reason: The landlord is not providing Insurance to the tenant. He has provided a service, just like any other service included on the Service Charge bill, and as such it is subject to the same VAT rules.

Warning: Be particularly careful with completion statements issued by Solicitors. You could end up severely out of pocket.

PropPack will automatically add VAT as part of the built-in service charge system.

If you are manually calculating this liability and then entering the charge into the rent ledger, then you must charge VAT.

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