Transferring VAT registration on incorporation

Transferring VAT registration on incorporation

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Sole trader VAT registered client now to incorporate and I'm likely to keep it simple and do a transfer of the existing VAT registration.

There is some kit to transfer but also the possibility of Goodwill, I'm not sure.  I see from their site however that on the transfer of a going concern it only happens VAT free if both sides are VAT registered on the day of the transfer.

The problem is that if I form the company today and immediately apply for VAT registration it could take weeks (months) for the VAT registration to come through but the clients needs to transfer the business in the next week or so.  The client uses the FRS and so the worst result would be having to charge VAT on any kit & goodwill that can then not be reclaimed by the new company.

I'm hoping they mean that the effective date of registration has to be on or before the transfer, regardless of when the certificate actually arrives.

Anybody any idea?

Thanks all.

Replies (3)

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By darren.austin
24th Oct 2012 21:24

I do not think the registration has to be in place on the date of the transfer. The TOGC rules refer to:

"Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer"

As long as the VAT application for the company is submitted on a timely basis, no VAT will be chargeable on the transfer.

Thanks (1)
Teignmouth
By Paul Scholes
24th Oct 2012 22:57

Excellent

Many thanks Darren, I hadn't spotted "or became one as a result of the transfer".  Looking into this phrase I find that, in a TOGC the buyer inherits the business including its past turnover and so, certainly in this case, automatically becomes liable to be VAT registered on day 1, ie he has no choice.

As a spooky twist to this question, out of the blue half an hour ago, a family member, who has been trying to buy a business for 6 months, emailed me to say that his lawyer had just told him that if he couldn't give him a VAT registration number the vendor would have to charge VAT and that HMRC told him he couldn't have a VAT number till the transfer had taken place!

I'm very lucky you were still up at this unearthly work hour, thanks again.

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By murphy1
25th Oct 2012 08:31

Paul,

 

If you do the VAT reg online, you will have a certificate within 5 working days. I have done quite a few recently and have been pleasantly surprised at the response time.

I agree with Darren too - we had a liquidator tell us the same in relation to a client who was going through a pre pack.

 

 

 

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