HMRC alters VAT rules for going concern property transfers

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HMRC recently altered its rules for transfers of going concerns (TOGC) covering VAT on associated property transfers, following HMRC's defeat in a tax tribunal case.

In November, HMRC issued HMRC issued Business Brief 30/12The new guidance follwed the decision in Robinson Family Ltd v HMRC [2012] UKFTT 360, in which the judge ruled that a going concern property sale could be VAT-free, despite the taxpayer retaining a interest in the property.

Under the new guidance, HMRC will accept that the transfer could still be free of VAT under its TOGC rules as long as the interest retained by the vendor is "small enough not to disturb the substance of the transaction." In practice, the condition will be fulfilled if the seller retains 1% or less of the property.

In a Gabelle tax analysis of the case, Vaughn Chown explained that the dispute arose when Robinson Family Ltd sold its letting business and supplied a shorter lease to the purchaser than the lease it originally held of 125 years.

Despite the vendor retaining a head-lease and supplying a new sub-lease, the transaction substance stayed the same, the tribunal judge decided. Therefore, the sale of the letting business could qualify as a TOGC, according to Gabelle. 

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About Rachael Power

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14th Jan 2013 12:07


The HMRC have to be wrong in their interpretation.For example,if there was a lease of 101 years on a rental property and instead of transferring that in its totality, the vendor delivered  a 99 year lease,surely it is reasonable to assert that the business has been transferred.The HMRC argument would be that the in 99 years hence,the business will revert to the original vendor and consequently,on account of the reversionary interest,TOGC does not apply.

Cannot see HMRC opinion prevailing.

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25th Jan 2013 22:59

VAT on the purchase price of a Public House


I purchased a Public House from a well known pub co and paid VAT on 95% of the purchase price.  Would like to de-register for VAT as turnover at present is less than the threshold and is crippling.  Is there anything I can do, or do I have to pay the VAT..  Tried to go down the TOGC route when purchasing the Pub but was advised by our accountants that I couldn't do that.

Any replies would be greatly appreciated.




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