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HMRC internal manual

VAT Transfer of a going concern

Introduction: An introduction and overview

This guidance deals with the basic principles covering the Transfer of a business as a Going Concern (TOGC).

VAT is chargeable on a supply of taxable goods or services made by a taxable person in the course or furtherance of his business. However, a transaction will not be a supply for VAT purposes if:

  • there is no consideration (unless there is a deemed supply);
  • it is within the same legal entity; or
  • there is a specific exclusion in the legislation such as, the subject of this guidance, the supply of assets in the Transfer of a business as a Going Concern (TOGC).

In broad terms TOGC law provides for the supply of all or some of the assets of a business, or part of a business, to be treated as neither a supply of goods nor a supply of services if certain conditions are met. Where those conditions are met the supply is outside the scope of VAT and therefore relieved from tax. It is a mandatory measure so it is important to consider the conditions whenever business assets are sold.

The law refers to the transferor (the person selling the business) and the transferee (the person buying the business). To avoid possible confusion this guidance refers to them as the seller and the purchaser respectively.

The TOGC provisions are intended to simplify accounting for VAT when a business or part of a business changes hands. For instance, it relieves the purchaser from the burden of funding any VAT on the purchase, thereby assisting cash flow.

The provisions also protect Government revenue by removing a charge to tax and entitlement to input tax where the output tax may not be paid to HMRC. For example where a seller charges VAT, which is claimed as input tax by the purchaser of the business, but never declared or paid by the seller.

This guidance explains the conditions when assets are not to be treated as a supply because they amount to the transfer of a going concern. It also explains the tax implications when that is the case and HMRC’s policy in specific situations. This guidance does not deal in detail with VAT registration and deregistration which can be found within VAT registration guidance.