Readers' forum : Mansion money

I read with interest Neil Warren’s recent article ‘On the right track?’ about input tax on overheads (see Taxation 1 June 2017) and have a similar query about a situation for which we have been receiving conflicting advice.

We act for a trust fund that is VAT-registered because it rents out some commercial properties with an option to tax election in place – in other words VAT is charged on the rental income. The trust also owns two large houses with historical interest in which the occupiers live free of charge. No rent is charged to them but one condition is that the house is open to visitors on 30 days a year. Visitors are charged an admission fee of £5 and the trust accounts for output tax on these fees.

The trust’s property agents have said that because all income earned by the houses...