Readers’ forum: Option to tax

My client has owned a commercial property for eight years and has rented it out to a company that makes only exempt supplies; in other words it cannot claim input tax.

The tenant has now vacated the building due to the coronavirus crisis and my client was concerned about the loss of rent. However fortuitously the client has already found a replacement tenant and this is a business that can fully claim input tax.

My client intends to spend £60 000 plus VAT on some improvements before the new tenant moves in. This work relates mainly to a new central heating system and window replacements.

It would seem sensible for my client to opt to tax the property to claim the input tax on the planned work because the VAT charge on the rental income will not be a problem for the new tenant. However...