Fiver or failure?

In 2009 a new farmer client bought a commercial building for £249 995 plus VAT and reclaimed input tax of £37 499.25 on the purchase price (the VAT rate was 15% at the time).

He has since rented it out to a tenant and never charged VAT on the rent nor has he opted to tax the property in the past three years.

My client’s thinking was that all of his income is zero-rated because he is a farmer and therefore he gets full input tax recovery. The input tax claim is therefore an error that we need to correct because it happened within the past four years.

Looking at the VAT position if the property had cost more than £250 000 excluding VAT the input tax incorrectly claimed would have secured a 10% annual recovery in each of the next seven years under the capital...