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HMRC internal manual

VAT Transfer of a going concern

Article 5 VAT (Special Provisions) Order 1995: Has there been the transfer of a business or just a sale of assets?: Principles

The correct approach to determining whether or not a TOGC has occurred has been developed through a number of cases –Zita Modes Sàrl v Administration de l’Enregistrement et des Domaines (C-497/01), Finanzamt Lüdenscheid v Schriever (Case C-444/10) [2012] STC 633 and Staatssecretaris van Financien v X BV (Case C-651/11) [2013] STC 1893.

The conclusions reached in those cases were helpfully summarised in the Upper Tier decision in Intelligent Managed Services Ltd (FTC/27/2014) by Mr Justice Barling.

“We consider that the following principles can be extracted from this case law:

1)    In order to be a transfer of a totality of assets, or part thereof, the assets transferred must together constitute an undertaking capable of carrying on an independent economic activity.

2)    This is to be distinguished from a mere transfer of assets.

3)    The nature of the transaction must be ascertained from an overall assessment of the factual circumstances, which includes the intentions of the transferee, as determined by objective evidence, and the nature of the economic activity sought to be continued.

4)    The transferee must intend to operate the business, or the part of the undertaking, transferred and not to simply liquidate the activity concerned immediately and sell the stock, if any.

5)    Although succession to the business is not a condition, but a consequence of the application of the no-supply rule, the nature of the transaction must be such as to allow the transferee to continue the independent economic activity previously carried on by the seller.

6)    Arbitrary distinctions are to be avoided, where those distinctions do not apply by virtue of the wording or purpose of Articles 19 and 29 [of the Principal VAT Directive], and the principle of fiscal neutrality must be respected.


It is necessary therefore to have regard to all the circumstances in determining whether the transaction is a mere transfer of assets, or of an undertaking which can carry on an independent economic activity. That must be considered both from the perspective of the transferee, who must intend to operate the business as a continuation of the independent economic activity previously carried on by the transferor.”


For more on IMSL see VTOGC5100