VAT on Transfer of a
Business as a Going Concern
The sale or transfer of a business raises several VAT-related questions. One of the most misunderstood areas is whether the transaction qualifies as a Transfer of a Business as a Going Concern (TOGC). Getting it wrong can lead to serious VAT issues, including misapplied tax, recovery issues, and HMRC disputes.
At My Tax Consultants, we work with accountants, legal advisers, buyers, and sellers to assess TOGC eligibility and apply the correct VAT treatment from the outset.
What is a TOGC?
A Transfer of a Business as a Going Concern refers to the sale or transfer of a whole business (or an independent part of it) which continues to operate under the new ownership. Where the conditions for TOGC treatment are met, the sale is outside the scope of VAT, meaning VAT on transfer of a business as a going concern is not charged.
This VAT relief is not automatic. Specific legal and operational requirements must be satisfied to apply TOGC rules correctly. Our role is to help identify these conditions, advise on documentation, and support the process with HMRC-ready records.
When Does TOGC Apply?
We help determine if TOGC rules apply by reviewing the details of the transaction, including:
- Continuity of business operations: The buyer must intend to carry on the same kind of business as the seller.
- VAT registration: If the seller is VAT-registered, the buyer must be registered or register before the transfer takes place.
- Transfer of stock, assets and customers: The business assets transferred must be sufficient for the business to function.
- Property considerations: If land or buildings are involved, we assess whether there’s an option to tax, and how that interacts with TOGC status.
Our team explains how these conditions apply in your specific case and what evidence HMRC expects to see.
Avoiding VAT on a Business Transfer
If TOGC treatment applies, the buyer will not be charged VAT on the transaction. This can lead to substantial savings, particularly where commercial property is involved. However, it also means there will be no input tax to reclaim, so the decision must be taken carefully.
Where VAT is charged incorrectly on a TOGC, this can result in:
- Unrecoverable input tax for the buyer
- Invoices needing to be cancelled and reissued
- Late payment penalties
- Delays in completion
We assist with contract wording, invoices, HMRC submissions, and correspondence to avoid these common issues.
Property and TOGC
One of the most common complications involves property. If the transfer includes commercial premises and the seller has opted to tax, TOGC can still apply. However, specific steps must be taken:
- The buyer must notify HMRC of their own option to tax.
- There must be no break in the use of the property for the same trading activity.
- Both parties must maintain consistent treatment throughout the process.
We help you understand the interaction between property VAT rules and TOGC treatment, reducing the likelihood of errors.
Transactions That Do Not Qualify as TOGC
Not all business sales qualify for TOGC relief. We’ll advise you when:
- The transfer only includes a selection of assets, not a functioning business
- The buyer does not intend to continue with the same type of trading activity
- The buyer is not VAT registered at the time of transfer
- The contract does not support TOGC conditions
In these cases, the transaction would be a standard taxable supply and VAT must be charged. We support correct classification to avoid errors, overpayments, or issues during VAT inspections.
Preparing Contracts and Agreements
Applying TOGC VAT treatment correctly starts with clear agreements. We help draft and review clauses to confirm:
- That TOGC treatment is intended by both parties
- That any option to tax conditions are satisfied
- That timing aligns with VAT registration
- That VAT clauses are consistent with HMRC expectations
We also work with your legal representatives to ensure everything aligns with the tax treatment and supports your records during any future audit.
Practical TOGC Support for Buyers and Sellers
Our TOGC VAT support covers:
- Full review of the transaction and VAT position
- Advice on VAT registration timing and evidence
- Clarification of buyer’s intention to trade
- Drafting or reviewing contract clauses
- Review of property and capital goods involved
- Liaison with HMRC where clarification is needed
- Guidance on issuing or withholding VAT invoices
We help buyers avoid paying unnecessary VAT, and assist sellers in avoiding exposure to VAT penalties or input tax disputes.
Why TOGC Advice Matters
A simple assumption that a business sale qualifies for TOGC can lead to financial and regulatory problems. With VAT treatment dependent on intention, documentation, and structure, there is no room for error.
My Tax Consultants delivers thorough and practical advice tailored to your business deal. Whether you’re buying a retail unit, transferring a company division, or disposing of a property with trading tenants, we will assess and support the correct VAT position.
Talk to Us About VAT on TOGC Transactions
Every TOGC case is different. To speak to a VAT consultant who can help you assess, apply, and evidence VAT on transfer of a business as a going concern, contact My Tax Consultants today.
We’ll help you approach the transaction with clarity, structure the transfer correctly, and avoid unexpected costs.
