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HMRC internal manual

VAT Transfer of a going concern

Common areas of difficulty: Successive transfers

Immediately successive transactions between different taxable persons are not covered by the TOGC provisions. The sale of assets by A to B and then immediately from B to C means that the assets are not to be used by B in carrying on the business. Then as B does not use the assets at all to carry on the business, he has no “going concern” to transfer to C. There are in fact two separate transactions, and neither is a TOGC, so tax is chargeable where appropriate. This is a common situation in property transactions where A sells property to B who immediately sells to C, both contracts being completed by a single transfer from A to C. Our policy generally remains to see two transactions, although there are differences in Scotland (below) and VTOGC7100 if one of the parties is the nominee of one of the others.

This view was supported in Kwik Save Group (MAN/93/11). Kwik Save (a supermarket operator) agreed to purchase a number of food stores from rival retailers. In each of the contracts of purchase there was provision for some or all of the stores to be transferred to Tates Ltd which is a wholly owned subsidiary of Kwik Save. The sellers had opted to tax all the properties. The sales were treated by all parties as TOGCs and therefore relieved from tax. We, however, argued successfully at the tribunal that those properties purchased and the sold to Tates were not covered by the relief. Kwik Save had not carried on the business of retailing before selling to Tates and therefore the purchase was not a TOGC.

However, care must be taken where consecutive owners are members of the same VAT group. Following the Kingfisher (QB[1994] STC 63 decision, if A and B (for example) are in the same VAT group there could be a TOGC to C by the single taxable person - the VAT group.

Where there is the transfer of a beneficial interest from A to B to C on the same day this is also seen as a series of consecutive transfers even where the legal title is transferred directly from A to C. The TOGC provisions do not apply to any of the transactions.

The situation is different in Scotland where it is possible under Scottish law to “dispone” the ownership of a property business directly from A to C, via B, and we have accepted that this may be treated as a TOGC providing all the other TOGC conditions apply.