Charging VAT... on commission?

[d000hg]

My rental property is managed by an estate agent and the agreement is they take 10% of the rental income - their invoices mark this as commission.

But I only just noticed they then charge VAT on the invoice, so that 10% actually ends up more like 12% in total.

I just wondered if that's normal... it just seems weird to tell someone "my cut is 10%" and then add on VAT. Maybe it's no different to any other business transaction?

[Greg@CapitalCity]

Yes, they have a habit of doing that. No doubt somewhere in the agreement you will find all figures are ex VAT. You are right - just a business transaction where you have been quoted the ex VAT price.

Its also worth noting (before you try) you also cannot register yourself for VAT to reclaim VAT incurred on rental properties. The letting of residential property (except furnished holiday lettings) is an exempt supply for VAT purposes and residential landlords are therefore generally unable to recover any VAT which they incur.

[northernladuk]

Same for me but the documentation did say 10% plus VAT. I just assumed this would be the case bearing in mind everything you buy/pay for has VAT so just went with it.

You can claim it back in a way as I claim the costs of the agent back against the income for personal tax reasons. I also claim the 10% wear and tear on furniture and fittings inc all costs for maintenance and so on.

[d000hg]

Already claiming other bits'n'bobs, they pay me after taking their cut so it just means the taxable personal income is reduced accordingly. I don't think 12% is too much to pay to avoid meeting the type of people who live there