Transfer of business as a going concern

Source: HM Revenue & Customs | | 06/11/2019

The transfer of a business as a going concern (TOGC) rules cover the VAT implications when a business is sold. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

Where the sale of a business includes chargeable 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. Under the TOGC rules no VAT would be chargeable on a qualifying sale.

All of the following conditions are necessary for the TOGC rules 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.

The TOGC rules can be complex and both the vendor and purchaser of a business must ensure that the rules are properly followed. The TOGC rules are also mandatory which means that it is imperative to establish from the outset whether a sale is or is not a TOGC. For example, if VAT is charged in error, the buyer has no legal right to recover it from HMRC and would have to seek to recover this 'VAT' from the seller.



Contact Us

21 Heavitree Road
Exeter
Devon
EX1 2LD
Tel: 01392 823999

Also in Seaton:

8-10 Queen Street
Seaton
Devon
EX12 2NY
Chris Hammett
Tel: 01297 624188  

 

Cookie Policy

Latest News

New guidance on sexual harassment and harassment at work
23/01/2020 - More...
The Equality and Human Rights Commission (EHRC) has published new technical guidance on sexual harassment and harassment

Don’t be taken in by this scam
22/01/2020 - More...
The Insolvency Service has warned that fraudsters have been contacting investors in insolvent schemes claiming to be

Disclosing VAT errors
22/01/2020 - More...
Where an error on a past VAT return is uncovered, you have a duty to correct the error as soon as possible. As a general

Newsfeed Search


Newsletter

With our newsletter, you automatically receive our latest news per e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login