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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?: break in trading - after the sale

It is not necessary for the new business to follow on immediately from the old for thereto be a TOGC, although to have done so is an indication that a TOGC has taken place.

The ‘break in trade’ needs to be considered in the context of the type ofbusiness concerned, this may vary between different types of trade or activity. Forexample, HMRC do not consider that where a ‘seasonal’ business has closed forthe ‘off-season’, as normal at the time of sale, that there has necessarily beena break in trade.

With pubs and restaurants there is often a break during which the premises arerefurbished before trading starts again. In Harber (LON/94/972) the pubwas left in such a state that the new owner could not begin to trade for several days.Despite this gap and the fact that different beer and food were sold it was held to be aTOGC. A similar decision was reached in a comparable case, Lyall t/a Old Red LionRestaurant (LON/83/28).

Again the relative importance to be attached to a break in trading will depend on theother facts of the case. In Montrose (EDN/87/98) it was held a 2 monthbreak before the new owner began trading was not significant. A TOGC had taken place asall other factors pointed in that direction. The purchaser took over the shop premises,stock, fixtures and fittings, available staff and the name of the transferor company.

Yet again if the purchaser of a seaside boarding house bought the property in Novemberbut did not open until April, the 5 month break of trading would not necessarily besignificant, in the context of normal trading patterns. However, a 5 month break of tradefollowing the purchase of a newsagents probably would be significant.