Readers’ forum: Farm buildings

We act for a farming company which has rented out a big parcel of land to another farmer for 20 years.

The tenant is now leaving and has paid VAT on his rent all this time ie my client has opted to tax the land in question.

During his period of occupation the tenant has constructed several buildings on the land which he probably should not have done but they were necessary for his farming activities. My client has agreed that the buildings will remain after the tenancy and the company will compensate the tenant £60 000 for them.

Should the tenant invoice my client for the buildings? If so should he charge VAT? And if the answer is yes to the second question can my client claim input tax of £12 000 on the company’s next VAT return?

I...