I purchased a pub in June 2014 for £60,000, and as the building was registered for VAT I applied for transfer as a going concern and did not pay VAT. The building was let out to a tenant. However, the tenant moved out and the pub was empty as soon as I purchased the pub. In August 2014, I applied to de-register for VAT as there was no income for VAT. I have now applied for a change of use into flats. Do I need to pay back the VAT or there is an exemption?

Arthur Weller replies:
It is questionable whether there will be a 'clawback' by HMRC of the VAT that you didn't pay. On one hand, the business of renting out the property did not continue after you bought it, so it is hard to argue that this is a transfer of a going concern (TOGC). On the other hand, you intended to continue to rent out the property and it was only because of circumstances beyond your control (i.e. the tenant moved out) that you didn't continue to rent out. But there is a further point to note. If you look at VAT Public Notice 742A (at section 3.2) you can see that there is an exemption from VAT if the previously commercial building is adapted to use as a dwelling. This may be relevant to your scenario. I would advise you to write to HMRC in Southend-on-Sea to ask for a written ruling.