VAT Transfer of a Business as a Going Concern

A company can be bought and sold by transferring shares of that company.

In contrast, a transfer of assets (including a transfer of goodwill or trading licences) involves a transfer of title in the assets from one person to another person.

Normally, a sale of assets by a taxable person is treated as a taxable supply subject to VAT at the appropriate rate.

In contrast, where assets are sold as part of a transfer of a business as a going concern, the transfer is not a supply at all and therefore no VAT is charged. This treatment applies to a transfer of the business irrespective of the VAT treatment which would apply to any of the underlying assets that are being transferred.

TOGC a for Requirements

For a transfer not to be treated as a supply for VAT purposes, the following conditions must be met:

There must be a transfer of whole or an independent part of a business;

The transfer must be made to a taxable person;

The recipient intends to continue the business which was transferred

To qualify as a going concern, the transferred business must be operational before and at the time of transfer.

For a TOGC to take place the recipient must be a taxable person at the time of transfer - i.e. the recipient should be registered or obligated to register for VAT.

This condition will be met if any of the following is in effect on the date of transfer: ·

The recipient is registered for VAT;

The recipient is required to be registered under the mandatory registration rules and has applied for registration to the FTA; or

The recipient has applied for voluntary VAT registration and the FTA has accepted the application.