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The taxpayer purchased a property for £200,000 plus VAT. He did not opt to tax the building and it was already let to a hairdressing business, although this ceased three months later
On 1 October 2012 my client bought a building for £200 000 plus VAT which was already let out to a VAT-registered hairdressing salon. Fortunately he did not opt to tax the building because the hairdressing salon’s lease expired on 31 December 2012 and the new tenant that has occupied the building since 1 January 2013 is an insurance company.
For the three months to 31 December 2012 the client provided the hairdressing salon with a towel laundering service. He claimed as input tax the £40 000 VAT charged when he bought the building. HMRC have recently written to me saying that the claim for input tax is an error and that they want my client to repay £40 000 together with interest and a penalty.
Notes 17 and 18 of VATA 1994 Sch 9 Gp 1 Item 1 appear to support my...
