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HMRC internal manual

VAT Cash Accounting Scheme Manual

Cash accounting scheme: Leaving the scheme: Transfer of a going concern

Registration number not reallocated

Regulation 63(2) requires a transferor to account for tax as per the deregistration procedures detailed in VCAS6550. The transferor may claim bad debt relief in accordance with VCAS6200.

63(2) Where a business or part of a business carried on by a person operating the scheme is transferred as a going concern and regulation 6(1) does not apply, the transferor shall within 2 months or such longer period as the Commissioners may allow, make a return accounting for, and pay, VAT due on all supplies made and received which has not otherwise been accounted for, subject to credit for input tax.

If the transferee chooses to operate cash accounting they are treated in the same way as any other business starting to use the scheme.

Registration number reallocated (VAT 68 procedure)

If a transferee keeps the registration number allocated to the previous owner, Regulation 63(3) requires them to continue using the scheme.

63(3) Where a business carried on by a person operating the scheme is transferred in circumstances where Regulation 6(1) applies the transferee shall continue to account for and pay VAT as if he were a person operating the scheme on supplies made and received by the transferor prior to the date of transfer.

If the transferee elects to use the normal method of accounting they must leave the scheme and account for all VAT due on supplies made and received, including those made by the previous owner whilst using the scheme, which have not already been accounted for under the scheme.

Part of a business transferred as a going concern

If only part of the cash accounter’s business is transferred, it is unlikely that the registration number will be reallocated under the VAT 68 procedure. The cash accounter will have to account for VAT on all supplies made and received, whilst using the scheme, within 2 months of the transfer taking place. This is because it will be difficult to separate out the records for different parts of the business.

Providing that the cash accounter’s remaining business continues to be registered for VAT and they still meet the scheme requirements, they may, if they wish, use the scheme for future periods once outstanding tax has been brought to account. Any difficulty arising from operation of this policy which cannot be resolved locally should be referred to Accounting, Registration and Exports for advice (see the Getting advice page on the VAT Directorate Intranet site).