As non domestic and commercial properties are exempt from VAT it generally doesn’t cause too many issues in respect of landlords insurance. That said there can be commercial advantages to exercising the option to tax, the key advantage is to allow recovery of VAT in respect of the purchase of the property as well as on refurbishment costs. However, it does also mean that any sale or rental of the property will attract VAT.
Whether the option is taken or not, it is important to understand the impact this will have on your property insurance.
Where the property is exempt from VAT it is important to ensure that the rebuild value of the property, not only allows for demolition, site clearance costs and professional fees, but also includes VAT as this will not be recoverable on any works following an insured loss on the building.
If you have chosen to exercise your option to tax on a building the reverse is true and no VAT will need to be included within the rebuild costs as this can be recovered. That said VAT will need to be added to the loss of rental income sum insured. In addition to this VAT will need to be added to the insurance rent, where this is recoverable from the tenant.
This is an issue that is often overlooked when arranging buildings insurance for landlords and many policies are arranged on the wrong basis. It is therefore important to make sure you are discussing your insurance needs with an insurance broker who thoroughly understands the intricacies of the property market.
The ProAktive Property Team
At ProAktive we care enough to understand your business to ensure that the insurance and risk management programmes we arrange are suitable for your needs. We aim to take care of your insurance and risk management headaches for you therefore freeing you to get on and run your business.
We have a team of experienced qualified professionals who understand your industry and can give you advice on a range of services we offer, including: –
- Insurance for landlords and property professionals alike
- Fire Risk Assessments
- Maintenance and servicing of fire alarm systems and extinguisher appliances – Through our partner Firestop
- H&S audits of common parts and assistance with risk reduction strategies
- Advice on Inheritance Tax issues and Pensions for property investors including SIPPs.
Our team includes (click links to view staff profiles):
Sam Leeder ACII
Dane Turner Cert CII
Ian Clayton Dip IOSH
Will Palmer Dip PFS
By Sam Leeder