If you are selling a business, you may be concerned about the VAT liability of the sale. Generally, the sale of assets by a business registered for VAT is subject to VAT. However, there is a possibility that the sale can be a “Transfer of a Business as a Going Concern” (TOGC), in which case VAT would not apply to the transaction.
What conditions must a TOGC meet?
The sale transaction must satisfy each of the following conditions:
- The assets are sold as part of continuing business
- The purchaser must intend to operate the same type of business as the seller with the acquired assets.
- If the seller is a taxable person, the purchaser must either be a taxable person already or become one due to the transfer.
- If you only sell a portion of a business, that portion must be capable of operating independently.
- The sale should not take place in a series of consecutive transfers
- Finally, there are additional conditions related to land transactions.
Why is it essential to understand the TOGC rules?
The TOGC rules can be complex, and the seller and purchaser must ensure they follow them correctly. If you fail to comply, VAT will be charged incorrectly to the buyer, which may have financial consequences for both the seller and the buyer.
Our advice
You should obtain expert VAT advice to avoid errors or misunderstandings and ensure you comply with the rules. When selling a VAT-registered business, the TOGC rules are essential, especially if the sale includes land. Our specialist accountants can assist you in determining whether a deal satisfies the TOGC conditions and advise you on the implications, including VAT liability. Additionally, we can help with the appropriate accounting treatment of the transaction and ensure compliance with all applicable tax laws and regulations.