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HMRC internal manual

VAT Margin Schemes

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HM Revenue & Customs
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Transfer of a going concern

Eligibility of goods under a transfer of a going concern (TOGC)

Goods obtained under a TOGC are eligible for the margin scheme, provided they were eligible in the hands of the transferor. If there has been a number of TOGCs, it is the first person in the chain who must have been eligible to use the scheme.

If goods are obtained under a TOGC from a bank or financial institution, and that body had obtained the goods when they were assigned the rights in a hire purchase or conditional sale agreement, the goods may not be eligible for sale under the margin scheme: see VATMARG12000.

Evidence to confirm that goods transferred under a TOGC are eligible for the schemes

When a business is transferred, you should be able to establish for assurance purposes that the goods were already eligible for sale under the margin scheme from the records transferred to the new owner.

Evidence under a TOGC

The purchase invoices (which are a requirement of the scheme) should indicate whether the goods are eligible. From 1 September 2007, the seller in a TOGC retains the records. However, he must make available to the buyer any information the buyer needs to comply with his duties under the VAT Act 1994. You can therefore accept photocopies of the purchase invoices.

Goods obtained under a TOGC prior to 3 July 1997

When carrying out assurance checks, you may come across goods which were sold in the periods you are checking but which were acquired by way of a TOGC prior to 3 July 1997. Prior to this date, the VAT (Special Provisions) Order and the VAT (Cars) Order made acquiring goods under a TOGC one of the qualifying circumstances for the onward sale of those goods under the margin scheme. From 3 July 1997, the orders were amended to make it clear that obtaining goods under a TOGC does not in itself create an entitlement to account for VAT under the margin scheme when the goods are sold on.

If you come across such a case, you should check that the goods were eligible for the scheme in the hands of the transferor.

Purchase value of goods obtained under a TOGC

The purchase price for the purpose of calculating the margin is the original price paid for the goods by the transferor of the business. If there have been a number of transfers, the purchase price will be the price paid by the last person to acquire the goods other than by way of a TOGC. In the following example the margin on which VAT should be calculated is £9,000:

### Step 1 ### Step 2 ### Step 3
     
Dealer A buys antique in 1999 from a private seller, value £1,000  Antique transferred as part of TOGC to Dealer B in 2001, value £5,000  Margin scheme to final consumer in 2003, value £10,000 

For assurance purposes, you should be able to establish the purchase price from the purchase invoices and possibly the stock records transferred to the trader by the previous owner.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)