Ask an expert: VAT on letting to a serviced accommodation provider

Question

My client has just bought the freehold of a large disused pub which has two flats above that had been rented out until recently but are now vacant. He is planning to refurbish the pub and let it to a commercial tenant. In terms of the flats above he has been approached by Dreamy Pads Ltd (‘the company’) which provides serviced accommodation to visiting professionals mostly under short-term arrangements (which could be for as little as a night or two) but sometimes for longer terms (of six months or more) under assured shorthold tenancy agreements (ASTs). It wants him to refurbish the flats to a high standard complete with all furniture and contents such as bedding and kitchen equipment. The company will then lease the flats...