VATMARG11000 - 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. The seller in a TOGC retains the records. However, they 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.

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 not the price paid under the terms of the TOGC. 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

Dealer A buys antique in 2016 from a private seller, value £1,000

Step 2

Antique transferred as part of TOGC to Dealer B in 2018, value £5,000

Step 3

Margin scheme to final consumer in 2020, 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.