VAT development

My client is a limited company that has a small turnover and it uses the VAT flat rate scheme. The company is considering the purchase of some undeveloped land although it has not yet formulated a definitive plan.

The possibilities are that the company will simply buy the land with a view to leaving it undeveloped and selling it later or building a small industrial unit on the site. If it took the latter option it would then have the choice of either selling the land and unit or renting out the unit.

The price of the undeveloped land is about £55 000 plus VAT. I have several questions.

First will the land count as a capital asset above the £2 000 limit and can the VAT charged be reclaimed under any of the three scenarios – buy and sell; buy develop and sell; or buy...