Readers’ forum: Claiming input tax on costs of selling buy-to-let properties.

One of my clients trades as a hairdressing salon and also owns five buy-to-let flats so he is partially exempt for VAT purposes.

He has recently sold two of the flats to fund the freehold purchase of a new salon in a prestigious city centre location. He asked if he could claim input tax on the estate agent and legal fees linked to the property sales and I said ‘no’ because the sales were exempt from VAT. The VAT on the selling fees for the flats was incurred during the VAT quarter to March 2023. A few months earlier a significant amount of maintenance and repair costs were incurred in relation to the flats so the total amount of exempt input tax exceeds £7 500 for the partial exemption year.

However a colleague says that an input tax claim is fine because the purpose of the expenditure is...