do i pay vat when buying a business

do i pay vat when buying a business

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Hi

I want t buy a business that runs powerboat rides.

This is zero rated for VAT.

The company is currenty registered for VAT, and the owner reclaim VAT on items he buys for the use of the  business.

He says I will have to pay VAT when buying the assets of the business.

But I thought I do not have to pay any VAT when buying a going concern.

What is the correct answer?

Replies (24)

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By User deleted
24th Oct 2014 09:07

If you buy the business as a going concern ...

... there is no VAT to pay but you must register the new business for VAT.

However, you have stated you are buyingthe assets of the business, that is not a going concern,

If it is a company, why are you not just buying the shares? That would be better from his point of view, unless the company is engaged in ther business activities that will continue.

However, if you are buying a business, the best advice anyone on here can give you is get yourself an accountant before you make costly mistakes and, to continue the nautical theme, get stitched up like a kipper.

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Replying to lionofludesch:
By johngroganjga
24th Oct 2014 09:39

TOGC

Old Greying Accountant wrote:

However, you have stated you are buying the assets of the business, that is not a going concern,

Don't understand this.  Why not?

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By User deleted
24th Oct 2014 09:53

Did you not read ...

... jndavs post?

For TOGC provisions to apply it is important that the assets, whatever they are and however many are to be transferred, put the purchaser in possession of a business, rather than simply assets.

I concede though, for clarity, I should have said

"However, you have stated you are buying the assets of the business, that is not necessarily a going concern"

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By johngroganjga
24th Oct 2014 10:00

Correction noted

But not just for clarity - it's for basic accuracy.

The first line of the question asserts that the OP is to buy a business.  Then he says he will be "buying the assets of the business" (not just some of them).  So I don't think telling the OP that despite what he thinks what he is buying is not a business takes this thread anywhere useful or helpful.

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By User deleted
24th Oct 2014 10:12

It was a caveat ...

... that is all.

The original line stands in truth, depends if you are blinkered and don't look at all the different ways a sentance can be interpretted.

I just expanded it for the hard of understanding :o)

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By iana
24th Oct 2014 10:12


The business is for sale as a business, running and operating.

The price I will pay includes everything that the business uses to operate.

This includes a boat, a mooring, a liecense, a storage shed, a fuel container, clothing (these are what I was referring to as assets)

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By johngroganjga
24th Oct 2014 10:27

So the first thing you need to do is ask the vendor why he does not think that it qualifies as a TOGC for VAT purposes.

That is of course assuming that you don't want to proceed by way of a purchase of the shares instead.  If you did, it would make your question redundant.

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Replying to paulhammett:
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By iana
24th Oct 2014 10:34

purchase of shares?

What would be the reason/advantage for proceeding by way of a 'purchase of shares'

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By iana
24th Oct 2014 10:31

clarify the histroy of the business, is it a going concern?

The business was started in aug 2014, and has run for 4 days during the summer to test the market.

The liecence is seasonal and runs from April to oct.

Everything is in place to operate the business.

 

IS IT THEREFORE A 'GOING CONCERN' ???

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Replying to carnmores:
By johngroganjga
24th Oct 2014 10:53

Ask the vendor

iana wrote:

The business was started in aug 2014, and has run for 4 days during the summer to test the market.

The liecence is seasonal and runs from April to oct.

Everything is in place to operate the business.

IS IT THEREFORE A 'GOING CONCERN' ???

It doesn't, initially, matter what you think, or what we think.  What matters is why the vendor thinks it is not a TOGC for VAT purposes.  The only way to find out is to ask him.  What happens next depends on what he says.

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Replying to North East Accountant:
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By iana
24th Oct 2014 10:43

i will ask

ok sure I will ask him, and get back to you.

thanks

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By johngroganjga
24th Oct 2014 10:37

Purchase

The advantage would be to avoid the VAT issue, if it cannot be avoided in any event.

There would be a number of additional risks also, so you should take advice if that option is available to you.

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By spidersong
24th Oct 2014 10:55

Actually the first thing I'd need..

The first thing that occured to me reading this was "what size are these boats" I've always thought of powerboats as fairly small vehicles so wouldn't have been too sure of the "this is zero rated for VAT" line.

Also the OP hasn't said that they are, will need to be, or are planning on becoming, VAT registered which would be a prerequisite for treating the TOGC as no supply in this case. So is it possible that this is why the vendor is looking to charge VAT?

EDIT: This was in response to a few posts ago, but having seen further posts I'd be asking - are you in a position to run a business?, the licence runs to October, does it follow on for another year after this or is it automatically renewable. If it's not then presumably you wouldn't have all you need to trade (assuming you aren't likely to complete the deal in the next week) and in essence the original business is just selling their powerboat(s) with you needing to obtain your own licence to actually continue to trade.

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By User deleted
24th Oct 2014 10:53

My position hasn't changed ...

... purchase of a businesses assets is not the purchase of a going concern, same as buying a vehicle is not buying a car - it may be, but is not absolute. The OP changed terms of reference in his question raising doubt.

My point was relevant, the OP has clarified and now it is not.

If people are unable to read in the context I write I care not.

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By johngroganjga
24th Oct 2014 10:56

Precision

You are doing it again.

I think in your first line you mean "may not be" instead of "is not".

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By User deleted
24th Oct 2014 11:26

Thankfully ...

... I have regular bowel movements.

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RLI
By lionofludesch
24th Oct 2014 11:31

@iana

Just checking - I take it you're going to be registered for VAT ?

I too am interested in the zero rating.  Are these power boat rides from somewhere to somewhere else ?  Or from somewhere back to where you started ?

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Replying to fishfishyfishfish:
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By spidersong
24th Oct 2014 12:04

Round Trips...

lionofludesch wrote:

Are these power boat rides from somewhere to somewhere else ?  Or from somewhere back to where you started ?

HMRC don't seem too worried on this aspect anymore (unless it's an airplane or baloon ride which they still say can be made for reasons other than passenger transport) they accept that a river cruise can be ZR passenger transport and many of these are 'return to base' type junkets.

See the following extract from VTRANS030500 the VAT manual on transport:

"However, ferries, canal boat trips, and other round trips or excursions by boats, without other facilities, on the open sea or other waterways to which the public have free and unrestricted access are zero-rated, providing the general conditions of item 4 are met." [Item 4 being vehicles/vessels carryig 10 or more passengers]

I have assumed that the trips don't include an opportuntiy to pilot the boat or anything like that as well.

 

 

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Replying to fishfishyfishfish:
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By iana
24th Oct 2014 13:16

vat registered


the seller is vat registered and I will be, the trips are in a 9m powerboat, which is liecenced to carry 12 passengers and 2 crew.

The trips will be along the south coast and back to base

From what I have read tis means the business is zero vat applicable

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RLI
By lionofludesch
24th Oct 2014 12:25

Thanks for that - very helpful - although I'd take issue with the word "junkets", given that the trips have to be on boats "without other facilities".

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Replying to David Gordon FCCA:
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By spidersong
24th Oct 2014 15:11

Junket - "an extravagent trip or celebration"

lionofludesch wrote:

...although I'd take issue with the word "junkets", given that the trips have to be on boats "without other facilities".

Ah well we're simple folk down/up/along* here (or that might just be me), if you're not using oars and/or plastic barrels strapped together then I count it as extravagent. When I were a lad...mumble..rhubabrd...blah...blah...etc. :)

(*delete as appropriate depending on where you are in relation to East Anglia)

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RLI
By lionofludesch
24th Oct 2014 15:47

Fair enough

Take your point, spidersong.

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By buttinski
24th Oct 2014 16:14

There is only

one piece of advice - get to see a suitably qualified accountant.

You cannot risk getting it wrong as a result of asking questions here, and possibly misinterpreting the answer.

The vendor may say that VAT is applicable because he knows as much as you!!

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