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HMRC internal manual

VAT Transfer of a going concern

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 40 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, 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.

For further information, please see Section 8 of Public Notice 700/9 [link].