Readers’ forum: Does piano sale create a VAT adjustment?

One of my clients is VAT registered as a sole trader and she purchased an expensive grand piano for £8 000 plus VAT with a view to giving lessons to students. I told her that she did not need to account for output tax because the lessons qualify as exempt from VAT as private tuition but that she could not claim input tax of £1 600 on her return because of partial exemption.

She gave lessons for about six weeks but then received an offer from an American music lover to sell the piano to him – he offered £13 000 plus VAT and my client accepted the offer. My client has asked if she can now reclaim the VAT of £1 600 on the original purchase of the instrument and my understanding is that the answer is ‘yes’ because of the payback and clawback rules. We can include the...