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HMRC internal manual

VAT Transfer of a going concern

Land and Property: Property rental business: nominee of seller and purchaser

There are certain situations where a nominee may hold the legal title in property for a beneficial owner. Some common examples of this include:

  • where the legal title is held by four or fewer persons on trust for a partnership;
  • (this example does not arise under Scottish law);
  • where the legal title is held on trust for an unincorporated association;
  • where legal title is held on trust for a pension fund.

Where such a nominee is the seller of the legal title, Paragraph 8 of Schedule 10 to the VAT Act 1994 deems the beneficial owner to be the seller and therefore it is possible for the transaction to be a TOGC. However, where the nominee is the purchaser, a TOGC is not technically possible because the new beneficial owner will be treated as the person carrying on the business rather than the nominee. To alleviate this problem, from 1 June 1996 we have allowed the parties to choose to treat the new beneficial owner as the purchaser for establishing whether there has been a TOGC if the following conditions are satisfied:

  • the business in question is that of the letting of the property;
  • the seller, nominee and beneficial owner agree to choose this treatment; and
  • the identity of the beneficial owner is disclosed to the seller.

The person transferring the property interest to a nominee for a named beneficial owner will be expected to check the VAT registration and VAT elections made by the beneficial owner.

Where only the beneficial ownership of a property letting business is transferred and the legal title is retained by the seller there may be a TOGC. If the seller’s ownership is reduced to being no more than that of a bare trustee we accept that the property together with its lettings may be transferred as a going concern.