Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

VAT Transfer of a going concern

HM Revenue & Customs
, see all updates

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

Goodwill is a term used by different people to mean different things. In the context ofselling a business it is sometimes defined as the difference between the value of a business as a whole and the value of its assets as individual items. The following factors can contribute to the existence of goodwill:

  • the relationships with customers and suppliers;
  • the reputation of the company and its product;
  • the location of the business;
  • the expertise of the work force and management;
  • the market share obtained.

Accordingly, the transfer of business names, trade marks, premises, staff etc can affect the transfer of goodwill even if it is not expressly sold. Goodwill will usually bean important factor in your decision whilst its absence from any transfer does not imply that no TOGC has taken place, its presence normally gives a very good indication that it has. This is so even if the contract for sale attributes only a nominal value to goodwill.

In Quadrant Stationers (LON/83/32) the good will of the business being sold was said to be at such a low level that a value of £1 was attached to it. Despite this it was held that the fact that it was mentioned at all was a contributory factor in deciding that there had been a TOGC.