Eaten up

27 May 2009

Issue: 4207 / Categories: Forum & Feedback

A limited liability partnership owns a restaurant premises, while the trade is operated by a limited company. What are the VAT implications if rent is unpaid, and who is entitled to capital allowances? The landlord can claim allowances used or provided for the purposes of a rental business, and VAT applies to an ‘economic activity’.

A limited liability partnership (LLP) was set up as the landlord of a trading company (a restaurant). The LLP has also borne the costs of the £275 000 refurbishment of the restaurant.

The LLP has opted to tax its interest in the property and has issued rent invoices to the company (none of which have been paid due to the restaurant’s poor trading).

The LLP has no other income – rental income when received will be its only foreseeable source of income. The LLP has reclaimed all of the VAT on the refurbishment costs.

The members of the LLP are not directors of the company (which is owned and managed by other family members) but one of the members does have a one-third interest in the company. Comments on the following matters would be welcomed.

Are there any issues that might prejudice the VAT previously reclaimed by...

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Eaten up

27 May 2009

A limited liability partnership (LLP) was set up as the landlord of a trading company (a restaurant). The LLP has also borne the costs of the £275 000 refurbishment of the restaurant.

The LLP has opted to tax its interest in the property and has issued rent invoices to the company (none of which have been paid due to the restaurant’s poor trading).

The LLP has no other income – rental income when received will be its only foreseeable source of income. The LLP has reclaimed all of the VAT on the refurbishment costs.