VAT registration for TOGC

VAT registration for TOGC

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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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chips_at_mattersey
By Les Howard
21st Mar 2016 14:15

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.

Thanks (1)
Replying to the_fishmonger:
By Linx
21st Mar 2016 14:25

Hi thanks very much for your reply.

what 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?

my query is he buys the business personally but he will trade as a limited company, if he register for vat for his company from the completion date, as it will be his company making taxable supplies, will that satisfy for the seller not to add vat on the purchase price?

many thanks

Thanks (0)
chips_at_mattersey
By Les Howard
21st Mar 2016 16:33

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!

Thanks (1)
Replying to TickTock:
By Linx
23rd Mar 2016 09:12

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

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Replying to Paul Crowley:
Stepurhan
By stepurhan
23rd Mar 2016 12:36

Single step

Linx wrote:

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

Only if the company is the one buying the business.

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)

Thanks (1)
Replying to Wanderer:
By Linx
23rd Mar 2016 20:20

HI

Thanks very much for your reply. 

Theoretically it the person take over the business and run it himself  for any length of time it will be TOGC and when he incorporate a company to run it, the transfer (changing of entity) will be another TOGC. I called hmrc about it previously and asked could this be reduced to one step instead and the answer seemed to be yes at the time. I am still not sure about it so I thought to get some insight from here, and I could see the logic in your reply however if this could be reduced to one step there is no loss of tax from hmrc, so I just want to check ..

Many thanks

 

 

 

 

 

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avatar
By djbrown
23rd Mar 2016 11:13

Relatively simple

If the person buying the business is not going to run it, it can't be a TOGC.

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