Transfer of a going concern checklist

If you’re VAT registered the default position when selling a business is that you must add VAT to the selling price. However, this won’t be the case if the business is being sold as a going concern.

Selling a business

Sales of assets will be exempt from VAT as a transfer of a going concern (TOGC) if certain conditions apply. If they do, TOGC treatment is compulsory. The main implication of the TOGC provisions is that the transaction is treated as being outside the scope of VAT which means that no VAT is chargeable.

In addition:

-          the VAT registration number of the seller can be transferred to the buyer, avoiding the need to deregister and re-register for VAT - although this is not advisable in most situations; and

-          VAT on certain costs associated with a TOGC may be recoverable.

If VAT is incorrectly charged on the transfer, the purchaser cannot reclaim it as input tax (because there was no taxable supply). The seller must cancel any purported VAT invoice issued and refund the amount charged as VAT (normally by issuing a credit note).

If the conditions are not met, the transaction will be subject to VAT in the usual manner for a sale of the items concerned.

Special provisions apply when the transfer involves:

-          land used in the business

-          property, computers, ships or aircraft that are subject to the capital goods scheme

-          a VAT group; or

-          assets transferred over a period of time.

Checklist

Use our Transfer of a Going Concern Checklist as a starting point for evaluating whether the conditions are met. If you are the seller, you can request advance clearance from HMRC if you are uncertain. Use the checklist as the basis for your query.