This guidance note provides an overview of the main VAT treatment regarding the transfer of business assets as a going concern. This note should be read by a business or its adviser if they are involved in the disposal of business assets.
Please see the Transferring land and property as part of a TOGC guidance note if the transfer involves land and property.
If the transfer of a business as a going concern (TOGC) provisions are satisfied, the transfer of all or part of the business assets will be disregarded for VAT purposes and no VAT can be charged on the value of the assets transferred. Businesses are required to treat the transfer as a TOGC if they meet the conditions outlined below.
This note could be used in conjunction with Flowchart – must the transfer be treated as a TOGC? and TOGC – transaction checklist.
Businesses need to be aware that they are legally required to use the TOGC provisions if they meet the conditions outlined below. Therefore, it is essential that the business or its advisers ascertain as soon as possible whether the transfer of the trade and assets should be treated as a TOGC in order to ensure that the correct VAT treatment is applied to the transaction. This point was confirmed by the tribunal in Advanced Business Technology (LON/83/195) (subscription sensitive). In this case the purchaser paid VAT to the seller on the purchase price but the output tax had not been declared by the seller. Both parties agreed that a TOGC had taken place but the seller did not repay the VAT charged and the purchaser used the VAT tribunal to force him to do so. The tribunal confirmed that once a TOGC had been agreed and the conditions in the law met, both parties were bound by it and could not opt out. If all the conditions for TOGC are met, the TOGC must apply and VAT must not be charged or accounted for on assets transferred (except, in certain circumstances, on the premises ie land and / or property used in the business). The VAT (Special Provisions) Order 1005, SI 1995/1268, Art 5; VATA 1994, ss 44, 49, 94(6); VATA 1994, Sch 4, para 8; VTOGC2000; VTOGC3000; VTOGC4000; HMRC Notice 700/9; Directive 2006/112/EC, Arts 19 and 29 (subscription sensitive)