Readers’ forum: Is there VAT on land sale bonus?

One of my farmer clients sold a parcel of land in 2005; the proceeds were exempt from VAT because there was no option to tax election in place on the site.

In 2021 the client made an election with HMRC to tax other parcels of land with HMRC but – by mistake – included the land on the form VAT1614A which was sold 16 years earlier. In most cases this would not be an issue but my client has unexpectedly received a bonus payment of £20 000 this month from the developer who purchased the land in 2005. The payment is linked to profit margins achieved by the developer which has entitled my client to this extra windfall.

My question is: should we ask the developer for VAT of £4 000 because of the 2021 election or can we say that the £20 000 relates to extra money...