Buy-to-let income and the flat rate scheme - May 2009
Beware of this trap! It appears that HMRC's interpretation of a 'business' for the flat rate scheme would include rental income from buy-to-let properties. The flat rate scheme applies a flat rate of VAT to all business income of the entity (e.g. sole trader, company, partnership) including VAT exempt income.
This means that if Mr Brown has earnings from a buy to let property and also runs, say, a public house in his own name, then the flat rate percentage will apply to the income not only from the public house but also from the buy-to-let property.
If the property was under a different ownership, for example jointly owned with Mrs Brown whilst the pub remained in Mr Brown's name only then we would not have this problem.
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