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HMRC internal manual

VAT Transfer of a going concern

Property rental business: Minimum occupation: Examples

Although each case must be considered on its own facts, there are some general principles that can be applied using the advice set out at VTOGC7150

Here are four examples. In all cases X is selling to Y. They and all other parties (other than residential tenants) are assumed to be fully taxable.

Case 1

Y is the existing tenant of about 30% of a building.  Its lease will expire in a few years, and it wants to secure its occupation in the longer term.  So it buys the entire building from X.

50% of the building is let by X to other tenants who will remain and become Y’s tenants.  20% of the building is empty and Y will move into this area, now occupying 50% of the building.

The parties took the view that this was a TOGC on the strength of the lettings of the 50%.

Do the percentages make a difference – what if the lettings were of 5% of the building, and Y was going to occupy 95%?  And does Y’s motive for the acquisition weaken the case for TOGC?


In general terms, the percentage that is occupied is not a factor when determining what a TOGC is. Either there is a transfer of a business which is a going concern or there is not.

However, in circumstances where the let element is so small as to be negligible, it is unlikely that the sale of the entire building will constitute a TOGC.

Case 2

The site is a petrol station, with one building and a forecourt.  It has recently ceased trading and Y will demolish it and redevelop.  The building incorporates a flat, which X has let out to a group of foreign migrant workers.  Y is reconciled to not being able to get them to move out immediately, and hopes to collect some rent from them.  The rest of the site is vacant.


 The answer will depend upon the nature of the occupancy by the tenants. If occupation is under a lease which will remain extant when the transfer takes place, then this would point toward a TOGC   having occurred. However, if occupation is merely under an informal licence which can easily be terminated, then this suggests there is no an ongoing business being transferred.

Case 3

The site is a purpose-built trading estate of half a dozen buildings, constructed as a single development a few years ago.  There is a perimeter fence round the whole site, and tenants pay a service charge for the maintenance of the whole site.

All the buildings are tenanted, and Y is the tenant of one building.  It will remain in occupation and the other tenants will become its tenants.

Should this be treated as the sale of a single portfolio, or is it only a TOGC to the extent of the buildings not occupied by Y, with the sale price apportioned accordingly?


If the trading estate is sold as a single portfolio, then this transaction is a single TOGC, notwithstanding that there are separate buildings. A TOGC relates to the sale of a business and not to an individual asset of that business.

This means that the sale price should not be apportioned.

Case 4

The site is a former factory with associated yards, outbuildings and facilities, occupying an area several hundred metres square.  There is a car park on one corner of the site, which has its own entrance from the street.  X has granted a short lease of the car park to a local business, and has granted a licence to occupy one of the outbuildings to another business.  The rest of the site is largely derelict.

X originally obtained planning permission to redevelop the site into industrial units for letting, and Y now intends to do so but there may be a delay in commencing the necessary works.  In the meantime, the existing uses are likely to continue.


If X had sold the site of the car park or the outbuilding separately, with the benefit of the ongoing rental income, then these would in their own right have been TOGCs.

However, what has happened is that the car park and the outbuilding are a part of the overall sale of the now derelict site. X intended to redevelop the site and Y intends to do so as well, but we would need to see this evidenced. Provided it is, this is capable of being a TOGC.