Software & Property
I’m Clive — a qualified Chartered Accountant and hands-on property investor with over 30 years’ experience helping people make smarter financial decisions and build long-term wealth.
My day-to-day work is split between:
Investing in high-yield HMO properties across the North West and Yorkshire
Advising landlords, builders, and small businesses on tax, accounting and compliance
And I love both.
Because I believe smart property investing and smart tax planning go hand-in-hand — and most people don’t get either right.
Hello... I'm Clive Cass
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Accounting Software
There are 4 ways to maintain your accounting records:
Manual (paper and pen);
Excel which is a spreadsheet that replicates manual records;
Integrated Accounting software such as Quickbooks, Xero, FreeAgent & SAGE.
Integrated Systems
Integrated accounting systems are the way to go when your accountancy and tax requirements reach a certain level of complexity. This will often be the case if you act as a limited company and need a Balance sheet or where you are VAT registered. I am happy to advise what software you will need now and when it is time for you to move on to something else.
Microsoft Excel
Excel is MTD compliant however will not easily cope with more complex issues such as VAT, large portfolios and limited companies where a balance sheet is required. If this is all you can manage it is however a reasonable way (and better than manual records) to provide the information to your book keeper to transfer, if necessary, to accountaing software. I can of course set you up on a suitable Excel accounting system, such as my free one designed for small businesses.
These systems are ideal for landlords of Buy to Lets who want to either manage them rather than get an estate agent to do so or who want to at least be actively involved in some aspects of the management.
The accounting systems are excellent but are limited in that they generally cannot handle VAT or produce a balance sheet which is a requirement for limited companies.
The real beauty of these systems is that they are really simple to use and provide a lot of management information from simple reminders about deadlines for insurance or safety checks to details of tenancies and even great financial information such as rental yields, equity and remortages.
Property Management & Accountancy Systems
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Elite Broker Blogs
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VAT on early termination fees, compensation, and dilapidation payments
VAT on early termination fees, compensation, and dilapidation payments
From April 2022, HMRC’s guidance was changed to reflect their new stance on the VAT treatment of early termination fees, compensation, and dilapidation payments. This means that payments that were previously considered to be outside the scope of VAT are now considered to be subject to VAT.
This factsheet covers the issue of whether supplies are within the scope of VAT, not whether VAT should be charged. Property supplies are generally VAT-exempt, although it is possible to opt to tax a property, in which case supplies of that property are standard-rated.
The general rule
The key test to consider is whether goods or services are being provided in return for a consideration (usually a payment). This is known a “reciprocity” between the supplier and the customer. If the reciprocity exists, the transaction is subject to VAT.
Previously, HMRC considered payments described as “compensation” or “damages” to be outside the scope of VAT on the basis that there was no reciprocity. However, because of numerous court rulings, such payments are deemed to be subject to VAT, particularly if they are provided for in a contract.
Early termination of a contract
A contract may provide for the tenant to pay fees in the event of terminating a contract early, as in the case of lease surrenders. Such fees may be described as “early termination fees”, “compensation” or “liquidated damages”.
If the tenant of a vatable commercial property wishes to vacate the property before the end of the lease and is obligated to pay an early termination fee, the payment will be subject to VAT. This is because it is a payment being made in return for a service provided by the landlord. The service, in this case, is the right to use the property, even if the tenant does not wish to do so.
When the contract does not provide for early termination
When early termination fees are paid and the initial contract did not provide for those fees, the fees are still subject to VAT. This was shown in a VAT tribunal involving Lloyds Bank, which found that the landlord had made a supply by granting and exercising an option to terminate the lease in return for Lloyds making a payment and vacating the premises.
It's worth noting HMRC’s position regarding reverse surrenders. Reverse surrenders are when the landlord pays the tenant in order to terminate a lease early. In this case a supply is being made by the tenant and it will be either VAT-exempt or standard-rated depending on whether the tenant has opted to tax their interest in the property.
Dilapidation payments
Dilapidation payments, which exist to ensure the landlord is not out of pocket if the premises are not returned in the agreed condition at the end of the lease, are considered by HMRC to be outside the scope of VAT.
Generally, this is because dilapidation payments not inevitable at the beginning of the lease and are made so the landlord can return the property to its original condition. There is no reciprocity in this situation because the landlord has not received anything. HMRC say however, that they may depart from this view if in individual cases they find evidence of value shifting from rent to dilapidation payment to avoid accounting for VAT.
Further reading
HMRC’s VAT Supply and Consideration manual gives further examples – see VATSC05910, VATSC05920 and VATSC05930.
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