Changes to VAT accounting: good news for LPA receivers

LPA receivers collect rents, together with any VAT payable on those rents, and incur input VAT (i.e. the VAT on supplies to them) on costs associated with their appointment, such as development costs. The case of Sargent v C&E Commissioners confirmed that LPA receivers are obliged to account to HMRC for any VAT that they collect in the course of their business activities but that they are not directly taxable as they are only dealing with VAT on behalf of the borrower.

Unfortunately, while the obligation is clear, HMRC guidance on accounting for VAT has not been so clear, in particular concerning whether it is permissible for LPA receivers to set off input VAT. LPA receivers have to decide whether their duty to the mortgagee allows them to pay the rent without accounting for VAT, or whether they are obliged to account to HMRC for the VAT collected, as agents of the borrower…

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