Property deal and transfer of a going concern

Key points

• If the transfer of a going concern conditions are met the sale proceeds are outside the scope of VAT.
• If the buyer intends to give notice to a tenant after purchasing the building this can cause a problem with the transfer of going concern rules.
• The buyer must carry on the same kind of business as the seller after acquiring the building.
• Commercial reality supersedes the wording in a contract.

Accountants like the transfer of a going concern (TOGC) rules as far as VAT is concerned. The reason – understandably – is because it means that clients can sell assets often for large sums of money without charging VAT. This is particularly helpful for buyers who cannot claim input tax or – equally importantly – cannot fund the cash flow challenge of paying a large amount of VAT to the seller and having to...