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cashinmattress

Buy To Let Landlords Face New Vat Laws After European Court Ruling

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Buy to let landlords face new VAT laws after European Court ruling

Tenants in rented residential property face a possible increase in service charges of 15 percent now and 17.5 percent from 1 January 2010 following a European Court ruling delivered on Thursday 11 June.

The European Court was asked to reach a decision following a case in the Czech Republic, in which the tax authorities had sought to tax the charges made by a landlord for the cleaning of the common parts in an apartment block.

The Court ruled that the cleaning of common parts of a building did not fall within the VAT exemption for let property and represented a separate supply subject to VAT.

Terry Dockley, a VAT specialist at accountants and business advisers James Cowper, said: “This decision is likely to have a big impact on both landlords and tenants as there is a requirement for UK VAT law to reflect the decisions of the European Court. As yet we do not know when HMRC is likely to adopt this ruling.

“HRMC has typically allowed domestic service charges to be treated as exempt from VAT even where these services are provided by a third party. This exemption will probably have to be dropped, even where the services are supplied by the landlord, meaning that tenants can expect to see a 15 percent increase in their service charges once HMRC implement the decision, with further increases from January 2010.

“This ruling will also present problems for landlords, many of whom are not VAT registered. They will have to get to grips with an unfamiliar tax regime, with severe penalties for late payment. It is also likely to make it harder to negotiate an increase in rents and service charges at the next rent review.

More woes for Britons as the cash strapped citizens are at breaking point.

Edited by cashinmattress

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big impact on both landlords and tenants

A - it's not a "big" impact at all - 15% of a service charge.

B - the tenants will end up paying this as the landlords will pass it on

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A - it's not a "big" impact at all - 15% of a service charge.

B - the tenants will end up paying this as the landlords will pass it on

I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

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I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

How interesting.

But this thread was about VAT on service charges.

Did you realise that ?

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I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

Charming. Shame you don't post more often.

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Charming. Shame you don't post more often.

We'll be especially looking out for his posts.

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How interesting.

But this thread was about VAT on service charges.

Did you realise that ?

Yes.

But you know what us satanic buy to let landlords are like.

We just do what we want to.

Anyway, the point I was making in a round about way, is that rents rarely seem to go down. They seem to be tied closely to general inflation indexes.

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I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

Is it usual for BTL landlords to have such an arrogant attitude? :unsure:

Edited by clubberdude

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I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

Errr..... thanks for that.

What were we talking about again?

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They seem to be tied closely to general inflation indexes.

No.

Rents are tied closely to the Housing Market.

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Anyway, the point I was making in a round about way, is that rents rarely seem to go down. They seem to be tied closely to general inflation indexes.

Rents Decline Across Scotland

Edinburgh saw the most widespread change with 1 & 2 bed flats in the capital recording their first annual declines since Citylets started recording data in 2003, down 1.1% and 1.9% respectively. The city on the whole was 2.6% down on last quarter to average £732 with Glasgow down 0.7% to £560 and Aberdeen virtually unchanged at £860.

Never mind, we'll stick to anecdotes. So much more comforting than evil old data.

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Is it usual for BTL landlords to have such an arrogant attitude to their tenants? :unsure:

My tenants seem happy enough.

I respond to their needs, when required.

I have never had any disputes or word that the tenant is unhappy.

I do not believe anything I have said is arrogant.

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Anyway, the point I was making in a round about way, is that rents rarely seem to go down. They seem to be tied closely to general inflation indexes.

Mine's gone down considerably. Anecdotally this is not rare. Plus, the inflation indexes show rent is falling 8%.

But I still don't know what this has to VAT on service charges.

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I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

I negotiated a £20 per week reduction in my rent last week. London NW3. Very nice building in exceptionally nice area. Rents coming down all over London.

Don't see why Edinburgh will be any different.

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Rents Decline Across Scotland

Never mind, we'll stick to anecdotes. So much more comforting than evil old data.

Ah. Perhaps you need to read my original post again.

I clearly acknowledged that rents could go down. But I am yet to experience this.

If you want though, I could try to fit with your stereotype of the buy to let landlord. That would be fun.

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Is it usual for BTL landlords to have such an arrogant attitude? :unsure:

I think it's compulsory, clubber.

It's the same gene pool as estate agents.

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My tenants seem happy enough.

I respond to their needs, when required.

I have never had any disputes or word that the tenant is unhappy.

I do not believe anything I have said is arrogant.

Sorry I edited the tenants bit out in that previous post, as I realised it was possibly innacurate.

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Nope. Wage inflation.

You might be right there, debt.

Perhaps the size of the market at any time is related to the state of the Housing Market.

But I would have thought that House Prices and Rents did correlate ?

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I am a buy to let landlord.

I bought a place in Edinburgh in 1997 for £46k. In 2007 it was valued at £165k.

I increased the rent about 7 months ago by £30 per month. The tenant accepted the rise. When his lease ended he passed it straight on to his companion, who took out another 6 month lease.

In the entire 10 years of having this property, I have a total of 6 weeks in gaps. The quality of the place has diminished but the rent has creeped up.

I am yet to see any signs that rents are coming down but I'm not saying they wont or can't.

As for the value? If you told me in '97 that the value would climb to £165k in ten years, i would have peed myself laughing.

I expect the place will setlle at a value of £85-£95k by the time this is over. What do I care? Someone else pays for it anyway.

If it has been tenanted over the last 12 months you won't realise that rents have dropped until you come to relet.

Of course, on the other hand, if you are not bothered about the condition of your property and if you rent out without references then some tenants are happy to pay a premium for this.

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Sorry I edited the tenants bit out in that previous post, as I realised it was possibly innacurate.

Good.

I wouldn't want you thinking that I was arrogant toward my tenants.

That would be awful.

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