VAT on Contractor Recharges: A Guide for Letting Agents

Most letting agents recharge contractor work to landlords. Many add a margin along the way. Whether VAT is due on that recharge depends on how it's structured. Get it wrong and the VAT can be due on the full amount, not just your margin.

This guide walks through the five ways agents typically recharge contractor costs, with a plain-English verdict on each. It covers:
- When a recharge is a true disbursement, and when it isn't
- Why a hidden markup on a non-VAT-registered contractor can turn a £10 profit into an £8.33 loss
- How secondary payments fit in (they don't change the VAT position)
- How to charge for arranging work in a way that holds up
- What it means for your accounts and the VAT registration threshold
- Rent guarantee insurance, which is treated differently

It's based on a formal Note of Advice from Mike Payne of Grosvenor VAT Consultants, commissioned by DocDrawer. It's guidance, not tax advice. Speak to your own adviser before changing how you account for VAT.