VAT when business transferred as a going concern

The transfer of a business as a going concern (TOGC) rules concern the possible VAT liability resulting from the sale of a business. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

However, where the sale of a business includes specific assets and meets certain conditions the sale will be categorised as a TOGC. A TOGC is defined as ‘neither a supply of goods nor a supply of services’ and is therefore outside the scope of VAT and no VAT is chargeable.

Planning note

HMRC lists the following conditions necessary for a TOGC to apply:

  • The assets must be sold as part of a ‘business’ as a ‘going concern’. In essence, the business must be operating as such and not just an ‘inert aggregation of assets’.
  • The purchaser intends to use the assets to carry on the same kind of business as the seller.
  • Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer.
  • Where only part of a business is sold it must be capable of separate operation.
  • There must not be a series of immediately consecutive transfers.
  • There are further conditions in relation to transactions involving land.

Please call for advice if you are contemplating the transfer or sale of your business. The VAT at risk can be considerable and liability needs to be assessed before you dispose of the relevant assets.

Posted in Value Added Tax

Exeter Accountant MJ Smith & Co

Celebrating 25 years of excellence.

Free 1st Meeting
Fixed Fees
Free Support!

Find out more

Client Portal Login

Forgot Password?

Latest News

The VAT concept of business

The VAT system is policed by HMRC and there can be heavy penalties for breaches of the legislation. There are …
Read More

What is domicile?

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong …
Read More

Outline of special rules for use of vouchers and credit tokens

HMRC’s Employment Income Manual is clear that there are special rules when an employee receives goods or services by reason …
Read More

Twitter Feed