Finance News: Treasury proposes option for landlords not to tax charities

Charities could benefit from a Treasury review of VAT on rents, according to the charity group of the Institute of Chartered Accountants in England and Wales.

Gordon Brown announced a consultation on the subject in his pre-budget report.

Landlords often charge VAT on rents if they have spent money on refurbishing a property. They can recover the VAT, but as a result have to charge VAT to tenants.

The consultation document proposes to give landlords the option of whether or not to charge VAT. It could enable them to offer more competitive rents to charity tenants if a property is empty, or reduce rents to existing tenants.

"The proposal is good news for charities," said a spokesman for the group.

"A charity has to pay VAT on its rent if the landlord has opted to tax the premises. If the proposal is accepted, the landlord will be able to revoke the charge. This would save the charity paying out VAT, which for most is irrecoverable."

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