Chapter 20 - Transfer of Going Concern Flashcards
Introduction
If a business is transferred as a going concern, the supply is outside the scope of VAT.
VAT Charged When it Shouldn’t Have Been
1) the seller must cancel any VAT invoice issued and provide the new owner with a VAT refund
2) if any VAT is incorrectly shown on a VAT invoice which is not cancelled, it is recoverable by HMRC from the seller
3) the new owner will not be able to reclaim this amount as input tax because there was no taxable supply.
TOGC Conditions
All of the following need to be met
TOGC Condition A
The assets are to be used by the transferee in carrying on the same kind of business as the transferor.
It is not essential that the buyer pursues the same type of business as that carried on by the seller prior to transfer
TOGC Condition B
Where the transferor is a taxable person, the transferee must already be a taxable person or immediately become, as a result of the transfer, a taxable person.
TOGC Condition C
For part transfer, that part is capable of separation operation. It doesn’t matter whether it will be operated separately from any other business the new owner carries on
TOGC Condition D
The effect of the transfer must be to put the new owner in possession of a business which can be operated as such
TOGC Condition E
The whole or part of the business transferred must be a going concern at the time of the transfer
TOGC Condition F
There should be no significant break in the normal trading pattern before or immediately after the transfer
Transferring the VAT Registration Number
It is possible to transfer the VAT number of the previous owner of a business to the new owner. This is not always advised as the new owner will take on responsibility for the past VAT history of the business as well
Transfer of Records
The seller will keep his business records, unless the VAT reg number is transferred to the buyer. The seller must make records available so the buyer can comply with the VAT obligations
