Wrong charge

My client has owned a commercial property for three years and has charged VAT on rental income earned during that time. However he has no record of having made an option to tax election on the property with HMRC (and neither have HMRC’s Option to Tax Unit in Glasgow).

In fact there would have been no need for him to opt. He purchased the freehold of the property without being charged VAT because the seller had not made an option. Furthermore he has not incurred any major costs on the property since where VAT might have been charged by a builder.

The property is about to be sold but can we avoid charging VAT on the property sale? Could we give the tenant a VAT credit for the past three years of output tax on the basis that this was a mistake and no option was...