Hi Can I ask your opinions for VAT registration for the following senarios:
i know if a person buys a TOGC(transfer of going concern), and run it himself, then is it ok for him to register for VAT from the transferring date for the seller not to add vat on the purchase price.
but what about for the following 2 senarios?
1. if a person buys a TOGC(transfer of going concern), then his company is going to run it, then is it sufficient for his company to register for VAT from the transferring date for the seller not to add vat on the purchase price?
2. if a person buys a TOGC(transfer of going concern), then his partner's company is going to run it, then is it sufficient for his partner's company to register for VAT from the transferring date for the seller not to add vat on the purchase price?
Many thanks
Replies (7)
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TOGC
One of the conditions for a TOGC is that the purchaser is a taxable person from, at the latest, the date of transfer. This means the purchase is VAT free, but the Purchaser accounts for output tax on all sales immediately.
Please will you explain the arrangement in your option 2! If the Purchaser does not run the business, and sells it immediately to a third party (partner's company), then the TOGC test will fail, and output tax will be due on the transfers.
TOGC
If the Purchaser is not the person who will run the business, then there remains the question whether it can be a TOGC. This means he will pay VAT on the purchase of the buisness. And how will he reclaim that if he is not making taxable supplies?
I do wonder why he is entering into this arrangement!
Single step
Only if the company is the one buying the business.thanks very much for your reply.
for some other of my clients, they buy the business in their own name then incorporate a company to run the business and making taxable supplies, do you know if registering vat for the company (not themselves) will be sufficient for TOGC?
many thanks
Lin
This is the fundamental point you keep missing, that it needs to be a single step to work. The individual in-between neither being VAT registered nor actually trading is what would stop it being a TOGC. Transferring the business immediately into the company AFTER purchase doesn't alter the fact that two entirely separate transactions are taking place (previous owner to individual, then individual to company)
Relatively simple
If the person buying the business is not going to run it, it can't be a TOGC.