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Where Taxpayers and Advisers Meet

VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

stephenco
Posts: 3
Joined: Sun Feb 10, 2019 7:57 pm

VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

Postby stephenco » Sun Feb 10, 2019 8:02 pm

My wife and I are retired owners of 4 properties in the UK, all of which are in joint names and all managed for us as holiday lets.

The total gross booking income for these is just under £100K / annum and as such we have recently asked our accountant to register us for the Flat Rate VAT scheme which for this industry works out at 10.5% of the total booking gross income.

We chose the Flat Rate Scheme because we are rarely charged VAT and therefore there would be little VAT to reclaim.

We have been running this for a few months but keep forgetting that the 10.5% will be based on the £100K / annum as opposed to 10.5% on the net profit which after costs including mortgage, management fees, commission, cleaning costs, etc is usually only around £30K / annum.

Once the 10.5% is taken off the £100K it will leave just under £20K profit which means it’s hardly worthwhile taking into account the stresses, etc.

My question is, can someone please advise on any other aspects we should be looking at or ways around this please? :?:

bd6759
Posts: 3010
Joined: Sat Feb 01, 2014 3:26 pm

Re: VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

Postby bd6759 » Mon Feb 11, 2019 9:24 pm

Increase your fees. Include VAT so that those registered can reclaim.

Sort out your 70% expenses. What savings can be made?

AnthonyR
Posts: 246
Joined: Wed Feb 08, 2017 2:33 pm

Re: VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

Postby AnthonyR » Tue Feb 12, 2019 2:28 pm

Is it an option to let one or more of the properties on long terms lets, which brings your taxable supplies below the de-registration threshold (£83k) and then come out of VAT altogether?

Disclaimer - I'm not a VAT adviser - so hopefully someone with more VAT experience can point out the issues with this theory.
Anthony Rogers CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

stephenco
Posts: 3
Joined: Sun Feb 10, 2019 7:57 pm

Re: VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

Postby stephenco » Thu Feb 14, 2019 1:19 pm

Increase your fees. Include VAT so that those registered can reclaim.
Good point, I'll have another discussion with booking . com about this.
Sort out your 70% expenses. What savings can be made?
Unfortunately we've already looked at this many times but can't find any further savings. It may be time to let one of the properties go and then reduce our income to under the threshold. The worry there is that there appears to be rumours that the threshold is going to be reduced.

stephenco
Posts: 3
Joined: Sun Feb 10, 2019 7:57 pm

Re: VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

Postby stephenco » Thu Feb 14, 2019 1:21 pm

Is it an option to let one or more of the properties on long terms lets, which brings your taxable supplies below the de-registration threshold (£83k) and then come out of VAT altogether?
It may be time to let one of the properties go and then reduce our income to under the threshold. The worry there is that there appears to be rumours that the threshold is going to be reduced.

AnthonyR
Posts: 246
Joined: Wed Feb 08, 2017 2:33 pm

Re: VAT is taking it’s toll on ‘holiday let’ business – is there any way to reduce this?

Postby AnthonyR » Sun Feb 17, 2019 4:39 pm

It may be time to let one of the properties go and then reduce our income to under the threshold. The worry there is that there appears to be rumours that the threshold is going to be reduced.
It's been debated for a while. The issue is that across most of Europe VAT registration thresholds are generally much lower than here and HMRC feels like they are missing out on making life harder for small businesses (their favourite pass-time). Who knows what'll happen with Brexit and MTD round the corner.
Anthony Rogers CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk


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