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Should a landlord have charged VAT on rent paid by a charity?
My client owns a commercial property that he opted to tax when it was bought three years ago for £600 000 plus VAT. He claimed input tax on the purchase price and on the £50 000 plus VAT he spent on improvement and refurbishment costs. The building consists of four floors with a different tenant on each. The tenants all moved in six months after my client purchased the property; in other words when the improvement work was complete. They have all been charged VAT on their rents.
To my client’s surprise one tenant – a registered charity – is now saying that VAT should not have been charged on its rent because it has always used the building wholly for charitable activities so the option to tax does not apply.
The charity’s chief executive officer (CEO) has asked for a retrospective VAT credit and insisted that...
