Ices and input tax

My client buys and sells ice-creams and agreed to buy a warehouse from a family friend in April 2014. That property was bought by a separate property company that was already VAT-registered and the plan was to opt to tax the property and charge rent (plus VAT) to my client’s main trading company. The property company spent £80 000 plus VAT on improvements between April and September 2014.

However there is a problem. The property deal was completed only in September so it was then that we submitted the option-to-tax form to HMRC. We asked the department to backdate this to April to reclaim the input tax. The first rental charge can only be made from September because the property company did not have title to the property until then.

HMRC are requesting evidence that the client made the decision to opt to tax in April which...