Sale of building to Charity VAT

[LloydKW]

A company purchased a commercial building for £1,500,000 plus VAT which it intended to develop. It opted to tax the property on acquisition in order to reclaim VAT on the purchase. However a charity which provides food and clothing free of charge to homeless persons has now made an offer to buy the property. The charity intends to use the building for storage of the food and clothing prior to distribution. It will have a small office which will be used to administer the distribution process which will occupy about 5% of the property. The charity also intends to utilise an area at the rear of the property, which amounts to about 10% of the floor space, for fund-raising purposes by operating a cafeteria which will sell food and drink to the public at a commercial price. How should this be accounted wrt VAT?

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