Readers’ forum: Property challenge for insurance business

One of my clients purchased the freehold of two office blocks five years ago – one for £500 000 plus VAT and the other for £150 000 plus VAT. They have used the buildings for their own trading activities which as an insurance business are exempt from VAT. They have never registered for VAT.

Due to the increase in home working the directors have decided to relocate staff to a third building they own and rent out these other two offices to third party tenants.

I am confused about VAT: should the company now register for VAT and opt to tax these two properties charging VAT on future rent? If so does this mean they will be entitled to a 50% input tax windfall on the original purchase price ie the ten-year life of a property with five years registered for VAT (the next...