Readers’ forum: Hotel

A limited company traded as a hotel for 12 years and spent £300 000 plus VAT on a dining room extension in 2015. Input tax was claimed on this expense but in June 2018 the company ceased to trade as a hotel and instead rented out the building to a tenant for an annual rent of £50 000. The tenant also made a payment of £200 000 for the goodwill of the business and fixtures and fittings. They have continued to trade as a hotel and we treated the £200 000 payment as outside the scope of VAT under the transfer of a business as a going concern (TOGC) rules.

The problem is that the company client did not opt to tax the building so the rent earned since June 2018 has been exempt from VAT but it has continued to be VAT...