Readers’ forum: Claiming VAT on a new piano and then deregistering

One of my clients has formed a limited company to declare his income from giving singing lessons. He has just taken redundancy from an employed position with a symphony orchestra so this is a new business venture for him.

The company will buy a piano for £3 000 plus VAT and also spend £10 000 plus VAT on building alterations to his second bedroom which will then become a music room with suitable acoustics etc. He has asked if the company can register for VAT and claim input tax of £2 600.

I see no problem because the piano lessons will be VATable and the piano purchase and building work are directly linked to the lessons. But he has then asked if he can submit one VAT return – estimated sales of £2 000 in the first quarter – and deregister on the basis that his sales in...