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HMRC internal manual

VAT Transfer of a going concern

Common areas of difficulty: VAT Number and Retained Records

Under Regulation 6 VAT Regulations 1995, subject to certain conditions the VAT number of the seller may be reallocated to the purchaser (VAT 68 procedure). This has the effect of making the purchaser responsible for the debts and liabilities of the seller. Where the VAT number has not been so reallocated, this is not the case, even where the seller and purchaser are closely associated, for example with common directors.

Further guidance on the procedural aspects of VAT 68 action is contained in VATREG and a useful summary of implications and consequences are in Notice 700/9 Transfer of a business as a going concern.

The seller of a business as a TOGC retains the records. However, where the purchaser takes on the seller’s VAT number, the seller is required to transfer the records to the purchaser, unless the seller needs to retain the records, in which case he may apply to HMRC for permission to do so.

Where the seller retains the records, the seller must make available to the purchaser information necessary for the purchaser to comply with his duties under the VAT Act. If the seller fails to make this information available, HMRC may disclose to the purchaser information it holds on the transferred business that is needed by the buyer to comply with its duties under the VAT Act. HMRC will advise the seller of an intention to disclose information to the purchaser and this will provide the seller with the opportunity to make known any confidentiality issues.

Examples of the type of information that may need to be divulged includes: details of the seller’s taxable turnover in order to determine the purchaser’s liability to be registered for VAT; or the number of completed periods of the capital goods scheme in relation to a capital item.

If you receive a request from a purchaser to disclose information held by HMRC on the seller of a TOGC you must contact VAT Advisory Team to obtain authorisation prior to giving out any information. In addition to the seller’s details you should provide, via the usual PG1 submission arrangements, details of what information has been requested and why the purchaser has been unable to obtain it from the seller.

Where any seller, whilst remaining responsible for the records, entrusts the safekeeping of those records to a third party, whether that third party is, for example, a storage facility, an accountant, or the purchaser of the business, then the seller must still honour his obligations to furnish information and produce documents under Schedule 11 of VAT Act 1994. It would appear sensible that each party to a transfer would seek assurance from the other as to how access will be made available for as long as it is needed.

Where a company is in administration following insolvency and the company exits administration by way of a creditor’s voluntary liquidation or dissolution, as is likely if its business has been transferred to someone else, then the retention of records will be governed by the Insolvency Regulations 1994. VAT Notice 700/56 refers.