News
Property companies and VAT: the issues landlords often overlook
16 Jun 2026
When considering whether to hold rental properties through a limited company, most of the focus is usually on income tax, corporation tax, mortgage interest relief, capital gains tax and succession planning. However, VAT should not be overlooked, particularly where the company owns, buys, develops or lets commercial property, holiday accommodation or mixed-use premises.
For many residential landlords, VAT will not be a day-to-day issue because long-term residential letting is generally exempt from VAT. This means VAT is not charged on the rent, but it also means VAT on related costs, such as repairs, maintenance, professional fees and refurbishment work, is usually not recoverable. That can make a real difference to the overall cost of owning and improving a property portfolio.
The position can become more complex where a limited company owns commercial property. The letting or sale of land and buildings is normally exempt from VAT, but a business can choose to opt to tax land or buildings. Once an option to tax has been made, supplies will normally become standard rated, and the business can usually recover VAT incurred in making those supplies.
This can be beneficial where the company has incurred significant VAT on the purchase, refurbishment or development of a commercial property. However, opting to tax is not a decision to take lightly. It can affect future rental income, sale proceeds and tenants, particularly where the tenant or buyer cannot recover VAT themselves.
Holiday lets are another area where landlords can be caught out. Income from holiday accommodation is generally standard rated, meaning that VAT may need to be charged, and registration may be required if taxable turnover exceeds the VAT registration threshold. This is particularly important given the recent changes to the tax treatment of furnished holiday lets, which do not change the VAT position.
There are also circumstances where the same property could have different VAT treatments depending on how it is used, for example, long-term residential letting compared to short-term or serviced accommodation.
The key message for landlords and property investors is that VAT should be considered early, not after the structure has been put in place or significant costs incurred. Whether a limited company is buying a commercial unit, refurbishing property or running holiday accommodation, VAT can have a material impact on cash flow, pricing and the recovery of costs.
A VAT review can help landlords understand whether they are treating income correctly, whether VAT registration is required, and whether VAT on costs can be recovered. It can also help avoid unexpected VAT costs when buying, refurbishing or selling property.
At WR Partners, our VAT specialists can review positions and provide practical advice to help clients make informed decisions.
