VAT Consultant
Share this content

TOGC and VAT Registration

7th Oct 2014
VAT Consultant
Share this content

One of those perennial questions: - how does a Transfer of a Going Concern (TOGC) interact with VAT registration?

A TOGC requires that a business run by a ‘taxable person’ is transferred to another ‘taxable person.’ The supply of the business itself is VAT free, subject to meeting various conditions. A taxable person is a person who is, or who is required to be, registered for VAT. Thus, where a business which is already registered for VAT is then transferred to another person, the taxable supplies made by the transferor are treated as being made by the transferee for the purposes of his VAT registration. (VAT Act 1994, Sch 1, para 1(2) refers to this, and also s49(1).)

Depending on the exact circumstances, there are a number of possible outcomes. As with any significant business decision, professional advice should be sought.

One common scenario is where a sole trader who is not registered for VAT, transfers his business to a limited company. The company is not registered for VAT. Does the sole trader’s turnover count towards the company’s turnover for VAT registration purposes? No. Since, at the time of transfer neither was a taxable person, there was no TOGC. This means that the company can ignore the turnover of the sole trader to determine whether it should register for VAT.

HMRC Internal Guidance V1-28, para 10.2.1. confirms this point. It includes this statement: “If the transferor is not a taxable person at the time of the transfer the transferee shall not be deemed to have carried on the business prior to the transfer.”

Comment:  Where a person repeatedly transfers his business from one legal entity to another simply to avoid his liability to register for VAT, then I would that to be avoidance, and I would expect HMRC to take action. HMRC guidance on this point seems to have been redacted!

It is interesting that, since first writing this article, there has been an excellent debate on the AW forum on the issue. ( I am pleased that there is support for my own views from other well-respected professionals (thanks guys!).


You might also be interested in

Replies (3)

Please login or register to join the discussion.

By The VAT Doctor
07th Oct 2014 21:47

Wise words
As ever, great advice, and has certainly made me think about this and debate this with colleagues. A new business setting up may very we'll benefit from a period of trade as a sole prop before registering. Of course other tax issues etc play into this too. But you may just be able to get two bites at the registration cherry in some cases!

Wayne (The VAT Doctor)

Thanks (0)
By JackSparrow
20th Oct 2014 20:59

VAT partnership registration


HMRC SA department agree there is/was no partnership.

HMRC VAT insist ther IS a pship. Trying to collect £5,000.

(VAT registration was signed under duress*; as well as SA accepting NO'pship.)

*Client twice attempted suicide; fact conveyed to HMRCs Lin Homer. And were related criminal charges for person obtaining signature duress. A domestic offence in fact.

Appeal lodged with tribunal. Gobsmacked that VAT dept still in frame!!!!


Any ideas anyone?!!!


Recommend special tax counsel (Bristol Chambers or Birmingham)??




Thanks (0)
By ash-party
16th Jan 2016 22:11

Sticky Situation - First Year As LTD....

Thanks so much for posting this, 

Just today i've received a letter from HMRC essentially saying that i'd be liable for potentially upto £12k in VAT. I was so shocked and frankly terrified as I thought i'd played completely by the rules and done everything right, saved and budgeted frugally. 

Could you help confirm if my judgement is correct so I have a better chance arguing my case?, i've just finished my first year as an LTD.  I'm 25 and this is only my second year in business so £15k mean a hell of a lot to me.

Listed as an LTD 1st Nov 2014, prior to that i'd been a sole trader for a year, highest rolling total as a ST was £55k but realised a corporate structure was more appropriate, in October 2014 (my last month as a ST I had £28,855 in sales. My business is highly seasonal (Oct , nov and dec bring 80% of the years revenues.)

Anyway, in nov,dec of 2014 (as an LTD) I had sales of £52, a result of a very lucky viral campaign (this years nov & december totalled £28,000 as a benchmark and Nov & Dec '13 was £23k)I breeched what I though was the VAT on in the last month of first LTD year with one large 18K payment (oct 2015).

I flied for an exception (nov 2015) as my first year ltd sales as were £89k as a result of that final payment.

They asked for my sales for the last 24 month and my expected 12 month forecast (which is 50-55k). Looking back I stupidly?!?! put in my 24 months figures including those as a sole trader.

- Was this the wrong thing to do? (I did put an asterisk next to that said "sole trader")

- Should I write and inform them, just to clarify that this was a seperate entity all together and that as (i'm 25) and have never dealt with HMRC/VAT before I basically just got a tad confused and made a mistake of including them.

I stupidly didn't realise that VAT was rolling, and if that's the case if sole trader / ltd accounts "roll over" i'd have sales of £111,000 (dec '14-'15). And I guess this is why HMRC have said that my registration date should be Feb '15....

Any suggestions / comments re my exposure and appropriate tact in dealing with this situation would be welcomed as i'm a bit taken a back by it all.

Thank you







Thanks (0)