Transfer of a Going Concern Flashcards
What is the significance of Intelligent Management Services?
HMRC had a longstanding policy whereby a business is sold and the purchaser is part of a VAT group, and uses the new acquisition to make supplies to VAT group members, the business has effectively ceased and cannot be a TOGC.
UT decided that it was a TOGC as the acquisition related to supplies made outside the VAT group.
HMRC confirmed they would accept a business transferred into a VAT group as a going concern if:
1. The company intends to use the transferred assets to operate the same kind of business in providing those services to other group members
2. Those other group members use the services to make supplies outside the group
HMRC also confirmed that if a company is transferred out of a VAT group, it will still be a TOGC provided that if it were not for the VAT grouping rules, a business would have existed
What is the significance of UBAF?
If the business is acquired to make taxable supplies, any related input tax on acquisition is recoverable.
If the business acquired is to be used to make exempt supplies, any related input tax on acquisition is not recoverable.
If the business acquired is used to make taxable and exempt supplies, any related input tax is residual.
What is the significance of Abbey National for a TOGC?
Following the Abbey National decision, HRMC take the view that:
- VAT incurred on services that have a direct and immediate link with the transferred part of a business should be treated as an overhead of part of that business;
- Where that part of the business only makes taxable supplies, then the VAT incurred is deductible
What is the significance of Harber [1994]?
A break in trade for refurbishments did not breach the condition of significant break in trade.
What is the significance of General Distribution and Storage Ltd [2019]?
GDSL owned the freehold premises and leased to Starbucks, it sold the building with the lease to HSL.
HSL had entered into an agreement to sell to Foundary investments so there was no intention to operate the business.
Held not to be a TOGC.
What is the significance of The Old Red Lion Restuarant?
There should be no significant break in trading pattern before or immediately after the transfer
A short period of closure which does not significantly disrupt the normal trading pattern e.g. for redecoration will be ignored per this case.
What is the significance of Thruxton Parachute Club [1984]?
A parachute club became insolvent and ceased to operate in December.
In January, another club purchased its assets.
Despite the gap of five weeks, when trade was ordinarily quiet, the tribunal held that the transaction constituted a TOGC.
What is the significance of JP Neville [1992]?
It can be a TOGC if assets are transferred on different dates to the business but selling assets on their own, as was the case here, is not a TOGC
What is the case of Dearwood?
The TOGC test was whether the same business was capable of being carried on after the transfer, not whether it would be carried on.
Dearwood had not treated the transfer as a TOGC as it thought fitting kitchens was not carrying on the same business as selling furniture. It was held to be a TOGC.
What is the significance of Higher Education Statistcs?
The option to tax must be in effect, and the transferee must have notified HMRC of the option, no later than the date upon which the grant would have been treated as being made.
In this case, the relevant date was held to be the date of auction.
