Non-Resident Landlords and VAT…

We have a number of clients who are non-resident, but are required to complete a UK tax return as they have UK property letting income.  They incur VAT on property management fess, so should we charge VAT on their accountancy fees?

Services of a professional nature provided to a non-EC resident are deemed to be supplied where the recipient belongs (paragraph 16(2) Schedule 4A VAT Act 1994). As such the services are treated as outside the scope of UK VAT, as the rental property itself does not create a place of belonging for the owner. So no VAT should be charged.

This is in contrast to services which are directly related to land (paragraph 1(1) Schedule 4A) such as those of a property managing agent. Here the place of supply is deemed to be where the specific land or property is situated, hence your clients are correctly charged VAT.

The situation is slightly less clear for professional services supplied to an EC resident with UK property rental income. This particular scenario is not directly clarified in HMRC’s published guidance, however, we would argue that as property letting is a business activity for VAT purposes, the services should be treated as business to business under the general rule and therefore supplied in the Member State where the landlord belongs and outside the scope of UK VAT.

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