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HMRC internal manual

VAT Transfer of a going concern

HM Revenue & Customs
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Article 5 VAT (Special Provisions) Order 1995: Has there been the transfer of a business or just a sale of assets?: premises

The transfer of premises is significant for two reasons. Firstly, some businesses are soclosely linked to the premises from which they are run that if they are not transferred itis unlikely or even impossible that the business has been transferred. A property lettingbusiness obviously cannot be transferred without the property. Similarly, it would bedifficult to transfer the business of a theatre, bowling alley, ice rink etc withouttransferring the premises. However, as with all factors to be considered, much depends onthe nature of the business concerned and the overall arrangements.

The second way in which premises are important is where goodwill attaches to thepremises, so that their transfer is a good indication of a TOGC. This is often the case inretail businesses where the location of the premises is significant.

RP & DK Aghnihotri (MAN/85/165) “Whetheror not goodwill is expressly transferred, … the focal point of goodwill is the premisesto which persons may be expected to gravitate. It is this factor which inclines us in theinstant matter to find the transfer of stock, coupled with a transfer of the premises,amounted to the transfer of the business of the transferors as a going concern.”

This suggests that the premises is the most important factor to consider when dealingwith the TOGC of a retail business and may outweigh all the other factors. Despite thevery close relationship between the purchaser and the seller in Bonnet to Boot(LON/95/1273A), the tribunal found that the transfer of large amounts of stockdid not constitute a TOGC as the new business operated out of different premises and undera different name. However the fact that premises have not been transferred is notconclusive that there has been no TOGC. You should have regard to the individual facts ofthe case.