Rent, VAT and finance

This article covers how rent, VAT and costs work on a business property, and how you record rent when it arrives. Rent follows the lease, usually by the quarter, and VAT is shown on top. The example is Unit 3 Cordwainer Row: £24,500 a year, so £6,125 a quarter plus £1,225 VAT, £7,350 in all. For the lease terms behind it, see The Lease tab.

Where to look

Open the property's Finance tab. The By quarter chart counts in quarters for a shop paid quarterly or yearly. The Rent status button above the figures opens the rent demands. On a phone it is a card below the figures.

The figures here are the rent before VAT, which is your income. Press Rent status to open the demands, which show what the occupier pays with VAT.

How rent is demanded

The lease says how often the rent falls due. You set it as How it's paid on the lease, and the Rent figure shows it, such as £6,125 /qtr.

• Quarterly: 25 Mar, 24 Jun, 29 Sep, 25 Dec are the traditional quarter days.
• Quarterly: 1 Jan, 1 Apr, 1 Jul, 1 Oct are the modern ones.
• Quarterly from the lease start falls due on the start date and every three months after it.
• Monthly in advance, Annually in advance and Other are also offered.

Each row in the Payments list is one demand, by its due date. Arrears are counted from that date, not from a day of the month. If no cadence is set, the property has no demands at all and the Rent figure asks you to set one.

VAT

If you have opted to tax, every demand carries 20% VAT. The top of Rent status shows the total the occupier pays and the VAT inside it, for example includes £1,225.00/qtr VAT, then your income is the rent before it. Your records and tax figures use the rent without VAT. Abodient does not produce VAT invoices or a VAT return.

Change the VAT setting under Lease terms on the Lease tab.

Chase late rent

While a demand is overdue, press Chase rent in the Chasing box. Abodient drafts the message from the amount owed and how long it has run, and you choose who it goes to before you press Send. For a business tenant the draft refers to CRAR (Commercial Rent Arrears Recovery), never the Section 8 route used for homes.

Read the draft and edit it if you want before you send.

Record rent received

When the occupier pays, record it against the demand. The next pictures follow the September demand: chased while overdue, then recorded as paid late, on 14 October.

1. On Rent status, find the demand in the Payments list. An unpaid one is marked Overdue.
2. Press Action at the end of its row, then Record payment. The Record payment window opens.
3. Check Amount received. It starts at the full demand including VAT, here £7,350.00. Type a smaller figure if they paid part.
4. Set Received on to the day the money arrived.
5. Press the Record button, which shows the amount.

The row turns to Received, and Rent status changes to Up to date. Abodient files your income as the rent without VAT. Whatever is left unpaid stays as arrears; it is not added to the next quarter.

Costs and tax

• Business rates is an expense category. You'll see it in Where the money went.
• Insurance rent the occupier repays you for the buildings insurance is income.
• Mortgage interest is fully deductible, whoever owns the property. The Section 24 limit that caps it on homes does not apply.
• No automatic valuation. Abodient does not value a shop, so the yield box asks you for a figure with Add value.

If something's not right

• Rent shows as monthly and you expected quarterly. Open the lease and set How it's paid.
• The amounts look higher than the lease. Rent status shows what the occupier pays, so VAT is included. The lease figure is before VAT.