VAT - going concern

VAT - going concern

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A new client bought one of 2 retail premises from a company in liquidation (don't yet have purchase docs to hand to see if vat was charged).

The prior company was vat registered but, looking solely at the outlet my client has bought, the turnover is below the registration threshold. The client has not registered for VAT in the belief that the part of the business purchased is below the threshold.

My question is, do the TOGC rules apply here and the business should be registered? ie both outlets combined were over the threshold but individually are below it. 

Many thanks for any guidance

Replies (6)

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By ShirleyM
23rd Sep 2011 07:05

My understanding is that ...

If the seller is VAT Registered, then the buyer has to be VAT Registered too, or pay VAT on the purchase.

 

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By George Attazder
23rd Sep 2011 13:56

What's being sold?

If you're client's going to predominantly sell zero-rated goods, for example, then they might want to register anyway.

As Shirley says, they would have needed to register to have avoided VAT being charged on the purchase (ie to make it a TOGC).  If VAT was charged it might have had a knock-on effect on SDLT.

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By sjmaccounting
23rd Sep 2011 12:41

sorry should have pointed out....

it's chip shop so better not to be registered 

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By George Attazder
23rd Sep 2011 14:20

Just look at the part of the business your client's acquired

"For the purposes of determining whether the transferee is liable to be registered...he shall be treated as having carried on the business or part of the business before as well as after the transfer" (S.49(1) VATA 1994).

If the previous turnover of the part of the business your client has acquired is below the threshold, then he doesn't need to register.  If they don't register (and don't need to) though TOGC treatment doesn't apply and VAT gets charged on the transfer.

If they need to register but don't (they're a taxable person and) TOGC treatment should still apply, but they've failed to notify liability to registration.

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Replying to FirstTab:
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By sjmaccounting
23rd Sep 2011 14:26

Thanks George

That's exactly what I needed to know - apparently the turnover was held to be below £60k pa so I was just concerned that they may have had to register at the outset.

 

 

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By Chris Smail
23rd Sep 2011 14:26

As George says it is his choice

 

He does not have to register.

If he does not register it cannot be a TOGC 

If not TOGC the will have to absorb VAT on VATable Assets sold to him

If the previous company has opted to tax the property (why would it?)  then he will have to pay VAT on the property, but otherwise property exempt. - Ask, solicitor should have checked this

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