All UK VAT registered business have the option to defer payment if they have a VAT payment due between 20 March 2020 and 30 June 2020. The deferred amounts were originally due on or before 31 March 2021 but the Government announced in September an opt in scheme whereby the deferred amount could be paid in monthly instalments interest free up to the end of March 2022. In the context of changing space requirements, there needs to be a more strategic approach to identifying surplus estate as a source of cost containment or generating income. Subletting property can help to provide cashflow and offset liabilities, but it also adds a new layer of responsibility, as a landlord. The surplus estate requires active asset management through rigorous credit control, optimising leases and proactively engaging with tenants. These can be key in mitigating costs.

Where buildings have been opted to tax, the rent demand will have VAT applied and hence VAT would be due to HMRC. This can cause short-term cashflow issues if the rent is paid late or appears unlikely to be paid at all. Therefore, a considered approach needs to be applied in terms of the timing of the issuing of the rent demands.

Where VAT has been charged then the VAT element of bad debts can be recovered from HMRC once the debt is over six months old and has been written off in the accounts.

Risks and issues arising out of sub-tenants’ inability to pay can be managed by considering together a range of available levers such as rent-free periods coupled with lease extensions - value lost from a rent-free period can be recuperated through a longer length of contract. For any new leases, consider adding provisions to deal with ‘force majeure’ situations. We have extensive experience of working with corporate occupiers to manage both their occupied and surplus estates in terms of portfolio optimization for cost reduction, rent/debt collection. We have deep experience of identifying a range of pragmatic strategies to resolve issues with tenants who are facing payment difficulties. Our Property Management team can also provide the short-term resource capacity and capability needed to deliver these strategies.

All UK VAT registered business have the option to defer payment if they have a VAT payment due between 20 March 2020 and 30 June 2020. The deferred amounts are due on or before 31 March 2021. This should assist with cashflow management in the short term.

In the context of changing space requirements, there needs to be a more strategic approach to identifying surplus estate as a source of cost containment or generating income. Subletting property can help to provide cashflow and offset liabilities, but it also adds a new layer of responsibility, as a landlord. The surplus estate requires active asset management through rigorous credit control, optimising leases and proactively engaging with tenants. These can be key in mitigating costs.

Where buildings have been opted to tax, the rent demand will have VAT applied and hence VAT would be due to HMRC. This can cause short-term cashflow issues if the rent is paid late or appears unlikely to be paid at all. Therefore, a considered approach needs to be applied in terms of the timing of the issuing of the rent demands.

Risks and issues arising out of sub-tenants’ inability to pay can be managed by considering together a range of available levers such as rent-free periods coupled with lease extensions - value lost from a rent-free period can be recuperated through a longer length of contract. For any new leases, consider adding provisions to deal with ‘force majeure’ situations.

We have extensive experience of working with corporate occupiers to manage both their occupied and surplus estates in terms of portfolio optimization for cost reduction, rent/debt collection. We have deep experience of identifying a range of pragmatic strategies to resolve issues with tenants who are facing payment difficulties. Our Property Management team can also provide the short-term resource capacity and capability needed to deliver these strategies.