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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: What is a going concern?: continuity of the former business

In order for a business to be transferred it clearly must still be in existence at the time the transfer takes place. The business does not need to be a flourishing business. Even if the business has been scaled down due to financial difficulties or in anticipation of a sale there may still be a business to transfer (Baltic Leasing (LON/84/198)).In order to be regarded as “dead” we would normally expect such evidence as all employees having been made redundant, orders no longer being accepted/sought, supplies ceasing (but see VTOGC3630) etc.

J P Neville (LON/92/2527A) worked as a self-employed metal worker in the building industry. Most of his business was through a sub-contractor (Claydon). Claydon had financial difficulties due to the collapse of his main contractor and cease to trade. Neville renegotiated the contracts with the new owners of the buildings including re-pricing the work. In order to fulfil these contracts he bought steel from Claydon. He also arrange with the landlord to become tenant of the property formerly occupied by Claydon. The tribunal found that the Claydon’s business had not been transferred as a going concern. He had disposed of his equipment and premises and had made his staff redundant. The parties with whom he had contracted had collapsed owing him money and goodwill was non existent. The business had therefore died. All he had left was the steel which did not constitute a business in its won right (see VTOGC3400). The tribunal went on to express the view that had the contracts with the main contractors been assigned by Claydon to Neville whist both businesses were trading, its decision might have been different (see VTOGC3540).