Module 18: Corporation Tax Acquisitions

Question 1

When trade and assets of a business are transferred and business is transferred as a going concern (TOGC)

Answer 1

Supply is outside the scope of VAT

Question 2

TOGC conditions (5)

Answer 2

• assets are to be used by the purchaser in carrying on the same kind of business as the seller
• if seller is registered for VAT, purchase must already be/ must immediately become registered for VAT
• business is capable of separate operation
• business must be a going concern at the time of transfer
• no significant break in the normal trading pattern

Question 3

Charging VAT by mistake

Answer 3

If seller incorrectly charges output tax, purchase cannot recover from HMRC, must recover from seller

Question 4

Input VAT on professional fees recoverable if

Answer 4

Business transferred is among taxable supplies

Question 5

Acquisition of shares advantages (4)

Answer 5

• administratively easier
• losses carry forward, subject to anti avoidance
• seller usually entitled to SSE
• stamp taxes lower if higher L&B

Question 6

Acquisition of shares disadvantages (2)

Answer 6

• buyer inherits any legal/ tax problems of target

- additional 51% group company for buyer

Question 7

Acquisition of net assets advantages (4)

Answer 7

• assets purchased qualify for tax relief for buyer
• buyer can cherry pick assets and does not inherit history/ liabilities of target
• TOGC for VAT
• stamp taxes lower if low L&B

Question 8

Acquisition of net assets (3)

Answer 8

• brought forward losses are sacrificed
• gains arise in selling company
• administrative and legal costs higher