My wife and I own a leasehold hotel room. We are entitled to receive the net profits of our room but have to pay ground rent from this when a distribution is made. The Lease states that ground rent is payable (inclusive of VAT, if applicable). When we received our first distribution a self billed invoice was raised showing the net VAT exclusive income of the room with a deduction of ground rent and 20% VAT was added to this net distribution. We assume that the seller was obliged to register for VAT as his income exceeds the VAT registration threshold and therefore VAT is applicable. It seems to us that the seller should only deduct the VAT exclusive ground rent. Who is correct, the seller or us?
To us, it appears that we are having to pay the VAT but the seller is reclaiming the VAT on the ground rent and that also we are claiming VAT on VAT when we file our VAT Return.
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