What is the transfer of a business as a going concern for VAT purposes?

What is the transfer of a business as a going concern for VAT purposes? Be Aware, Getting it Wrong Can be Costly!!

The transfer of a business as a going concern for VAT usually involves high ticket items. To get the VAT liability wrong can lead to severe penalties/interest and it is in a company’s best interest to get these transactions right first time, rather than trying to unravel a situation post transaction. It is always worthwhile checking with your Hawsons VAT contact before the transaction takes place.

Normally the sale of the assets of a VAT registered or VAT registrable business will be subject to VAT at the appropriate rate. A transfer of a business as a going concern (TOGC) however is the sale of a business including assets which must be treated as a matter of law, as ‘neither a supply of goods nor a supply of services’ by virtue of meeting certain conditions.

Where the sale meets the conditions the supply is outside the scope of VAT and therefore VAT is not chargeable.

HMRC sees the conditions as being:

• The assets must be sold as part of a ‘business’ as a ‘going concern’*
• 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/Buildings. See link below – Section 2.3:

https://www.gov.uk/guidance/transfer-a-business-as-a-going-concern-and-vat-notice-7009#how-to-apply-the-togc-rules