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VIT13400

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Are invoices addressed to company director a problem?

Q. We trade as a limited company and all of our income is subject to VAT, i.e. we have no exempt sales. Our office premises are rented from a landlord who has opted to tax the property so we are charged VAT on the rent. However, the problem is that the lease agreement is between one of the company directors and the landlord so all invoices are addressed to this director. Does this cause us a problem with claiming input tax?

A. It’s a well-established principle of VAT that only a business or entity receiving a supply of goods or services can claim input tax. However, the good news is that HMRC accepts that this is quite a common arrangement, mainly because landlords want to be able to pursue an individual for unpaid rent, rather than a company with very few assets.

So, as long as the company fully reimburses the landlord for the rent and uses the premises wholly for business purposes, then input tax can be claimed. Another condition specified by HMRC is that the individual director must not be VAT registered in their own right. In effect, HMRC recognises that the director is a nominal tenant only. For further information, see HMRC’s guidance at VIT13400 (see The next step ).

For a link to VIT13400, visit https://www.tips-and-advice.co.uk , Download Zone, year 12, issue 1.