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HMRC internal manual

VAT Transfer of a going concern

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HM Revenue & Customs
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Common areas of difficulty: transfer of assets over time

Usually the transfer of all of the assets will take place at the same time. On occasions however, you may find that the assets have been supplied over a period of time. There is no requirement for the transfer of all of the assets to take place at once for Article 5 of the VAT (Special Provisions) Order 1995 to apply, provided that the effect of the transfers is to put the purchaser in possession of a business. Generally, the closer together that the transfers take place the more likely it is that they are in essence part of the same transaction, but this is not conclusive in itself. It is in situations like this that the intentions of the parties may be important as is shown by the case below.

Over a period Cohen Furriers (EDN/89/155) occupied the premises, bought the machinery and stock, dealt with sub-contractors, acquired and used the business name and employed some of the former employees. Despite this, the tribunal ruled that the purpose of the series of transactions was not to avoid Article 5 of the VAT (Special Provisions) Order and that there was no consensus between the parties as to the overall nature of the transaction. Consequently there had been a series of separate supplies ofthe assets and not a TOGC.

Even where it has been agreed that there has been a TOGC of the main business assets, you may find cases where other assets are acquired shortly before, or shortly after, the main transaction. It is likely in such situations that the TOGC provisions will apply to the entire transaction. This line of reasoning was followed by the tribunal in the case below:

Fondbane Ltd (LON/87/229) purchased a site which had formerly been run as a petrol and car service station with car and van hire. It was Fondbane’s intention to discontinue the current trading and refurbish the premises in order to sell second hand cars. The former site owner offered to sell his vehicles to Fondbane but this offer was refused as the prices were too high. Although the intention was not to run it as a petrol station, Fondbane could have done so and therefore the purchase of the site was a TOGC. This was accepted by all parties. Shortly before the contract of sale went through, Fondbane agreed to purchase the vehicles at a much reduced price. An invoice was issued, the tax on which was claimed as input tax. We disallowed this tax. The tribunal agreed with us that although the purchase of the vehicles was in a separate agreement, the substance of the matter was that the transfer of the vehicles was not truly separate from the TOGC.