Provided there is no rent review before the 5th anniversary of the lease date, you have three options to value the lease for VAT purposes:
- annual rent * 75% * number of years
- annual rent * multiplier (currently 21.27 I think) or
- competent valuation (this is the only method acceptable if there is a rent review within 5 years).
VAT is then charged at 13.5% of the vat valuation.
In order to avoid a cashflow issue, you can use the VAT 4A procedure which effectively means you self account for the VAT (so you don't pay it over to the landlord). You must apply to the Revenue in advance to have the VAT 4A procedure apply. Otherwise, you pay the VAT to the landlord and reclaim in the VAT return for the period.