Readers' forum : Labour-intensive

I read with interest Neil Warren’s recent article about the flat rate scheme (Taxation ‘Into the sunset’ 12 April 2018). From this I understand that input tax can only be claimed by scheme users on capital expenditure goods costing more than £2 000 including VAT. But in his list of ‘Flat rate scheme quirks’ Neil gave the example of a hairdresser who was unable to claim input tax on the costs of building an extension because it related to services not goods.

I act for an architect who uses the flat rate scheme and had an office extension built last year for £20 000 plus VAT. We asked the builder to raise two separate invoices for his materials (goods) which came to £18 000 plus VAT and his labour which was £2 000 plus VAT.

We claimed input tax of £3 600...