Readers’ forum: VAT challenges with holiday homes

I am confused about the VAT situation with a new holiday home that my client is buying. It was built from bare land by a builder but the planning permission prevents it from being used as a principal private residence. In other words it will not qualify as a new dwelling for zero-rating purposes. Is this correct?

I understand that a potential VAT escape route would be for my client to purchase a 999-year lease in the new home rather than the freehold because the deal would then be exempt from VAT rather than standard rated.

The leasehold option might be complicated so as a further option my client has asked if he could buy the freehold – plus VAT – but then rent it out for two or three years on a commercial basis and register for VAT on a voluntary basis to claim input tax....