Readers' forum : How the land lies

I act for an architect who has agreed to take on a new project which involves obtaining residential planning permission on a plot of land owned by a farmer. If the planning request is successful my client will receive a contingency fee from the farmer equal to 50% of all selling proceeds in excess of £2m for the land. So if the farmer sells it for £3m my client will receive £500 000.

The farmer has not opted to tax the land for VAT purposes so the £3m proceeds will be exempt from VAT. But this means that if my client charged VAT on his £500 000 fee in the above example (which I think is correct) this would be irrecoverable input tax for the farmer.

However what would be the situation if my client paid £1 000 now for the right...