TOGC - partnership to company

TOGC - partnership to company

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I have a client who has minimal business assets - he wants to incorporate his partnership. The only assets he will be transferring will be some desks/furniture and some IT equipment. Goodwill will also be created ( business element) on incorporation. So these are the only assets which will be transferred on change of status.

Will it still be possible to treat this as a transfer of a going concern for VAT purposes ?

Assuming this is ok, he will elect to get a new VAT number when completing VAT 1 for the Limited Company. The partnership's VAT is on the cash basis so will pay of it's VAT on debtors as cash is received after incorporation of the business. Does the existing partnership VAT number remain valid and operative after the TOGC or is their a requirement to deregister the partnership for VAT and pay over VAT on debtors etc at the date of deregistration ? If so this will have quite a cash flow impact on my client's business !

Some of the work will not have been billed by the partnership at deregistration - it will be invoiced by the company later in the year ( hence opening amounts recoverable on contracts transferred from the partnership to the company) - I assume VAT will not be payable by the partnership  on these amounts ( if they do have to deresgister)

Any advice most welcome !

Replies (3)

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chips_at_mattersey
By Les Howard
23rd Mar 2015 13:34

TOGC?

I am not sure that the transfer of assets only, in the way you describe, is a TOGC. The new owner has to gain possession of a business, not merely some assets and goodwill.

The partnership will have to submit and pay a final VAT Return, so you will need to plan cash flow for that, as outstanding invoices will still have to be accounted for.

Deregistration is obligatory if the partnership ceases to trade. The VAT number will effectively become invalid.

Given the number of specific issues involved, I recommend you seek fuller, professional advice on this one, to avoid leaving either party vulnerable to HMRC action.

 

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Replying to legerman:
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By Windy
23rd Mar 2015 15:04

Thank you very much for your detailed responses.

The company will simply carry on all the same work that the partnership now does - it is simply a change of legal entity from a partnership to a Limited company so the new owner is effectively gaining possession of the existing business so hopefully TOGC will apply ?

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chips_at_mattersey
By Les Howard
23rd Mar 2015 15:19

TOGC

If the company does carry on the partnership business, then it is likely the TOGC rules WILL apply, but your OP was worded slightly differently. You should create a simple sale document to confirm what is being transferred, so as to support the TOGC argument.

 

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