Readers' forum: Cutting their losses

We act for a company that runs a business from a property owned personally by the three directors. There is no lease in place and no rent has been paid to the directors since they purchased the freehold in 2014. The company has not been successful and has lost money so the directors have decided that it should stop trading.

They have been approached to move out of the premises so that the property can be let to another local company.

The deal agreed is that the other company is going to pay the loss-making company £50 000 to move out and then sign a lease with the directors for the ongoing rent.

We are concerned about the VAT liability of the £50 000 to be paid to the company. Should VAT be added because the trading company is VAT-registered or can we treat it as outside the scope because there is no...