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HMRC internal manual

VAT Transfer of a going concern

What is the transfer of a business as a going concern for VAT purposes?: introduction

This section provides advice on how to decide whether a transaction is the transfer of a going concern and the general approach you should adopt.

Normally the sale of the assets of a VAT registered or VAT registrable business will be subject to VAT at the appropriate rate. A transfer of a business as a going concern (TOGC) however is the sale of a business including assets which  must be treated as a matter of law, as ‘neither a supply of goods nor a supply of services’ by virtue of meeting certain conditions.

Where the sale meets the conditions the supply is outside the scope of VAT and therefore VAT is not chargeable.

HMRC see the conditions as being:

  • The assets must be sold as part of a ‘business’ as a ‘going concern’*
  • The purchaser intends to use the assets to carry on the same kind of business as the seller
  • Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer
  • Where only part of a business is sold it must be capable of separate operation
  • There must not be a series of immediately consecutive transfers
  • There are further conditions in relation to transactions involving land. See VATLP22000

 

 * The word ‘business’ has the meaning set out in section 94 VAT Act 1994 and ‘going concern’ has the meaning that at the point in time to which the description applies, the business is live or operating and has all parts and features necessary to keep it in operation, as distinct from its being only an inert aggregation of assets.