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HMRC internal manual

VAT Transfer of a going concern

HM Revenue & Customs
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Transfers and VAT Groups: assets on which tax is not due

Tax is not due on:

  • assets which were assets of the previous owner more than 3 years before the date of the transfer (s44(3));
  • any zero-rated or exempt assets;
  • goodwill (this is excluded administratively, not by s 44); or
  • assets subject to the capital goods scheme (s44 (4)): details of how to deal with CGS are at VTOGC5900.

The 3 year cut off point was originally introduced so as not to penalise the genuine reorganisation of asset holdings between associated companies. It was thought that any input tax advantage would be minimal once the assets were three or more years old. However, this has not proved to be the case and tax avoidance schemes whereby the TOGC takes place three years and one day after the assets were originally purchased, have been devised.

However, powers under VATA 1994, Schedule 9A allows HMRC to reverse the “mischief” of this scheme either by directing that the transferor is treated as a member of the group with effect from a date before the goods were brought or by directing that the subsequent intra-group supply be brought outside the scope of section43(1) “disregard”.