VAT - transferring land and property as part of a TOGC

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • VAT - transferring land and property as part of a TOGC
  • Additional requirements
  • Overview of the VAT treatment of the transfer of the land and property
  • Relevant date to notify option to tax
  • Disapplication of the option to tax
  • Transfer of a property rental business as a TOGC

A TOGC will often include the transfer of land and buildings, and additional requirements must be satisfied before land and buildings can be transferred 'VAT free' as part of a TOGC. The rules are explained below.

VATA 1994, s 49; Notice 742A, para 11.1; SI 1995/1268, Articles 5(2), (2A) and (2B) (subscription sensitive); Notice 700/9, para 2.4
Additional requirements

The transferor will need to identify what land and property will be transferred as part of the TOGC. Once identified, the transferor will need to establish the 'VAT status' of the property to the transferred.

The transferor will need to establish whether the land and property has been opted to tax or if the property is a new non-qualifying property which is either less than three years old or an unfinished building or civil engineering work and would therefore be liable to VAT.

Please see the Overview of VAT and property issues guidance note for more information.

If any of the properties have been opted to tax or are 'new' non-qualifying land and property, it will be necessary for the transferee to opt to tax the properties before the transfer is completed. The transferee will need to confirm that the option to tax cannot be disapplied under the VAT anti-avoidance provisions (see the Disapplication of the option to tax - relevant case law guidance note(subscription sensitive)) and that HMRC has been notified before the 'relevant date' (see below for more details).

If the transferor has not opted to tax the property, and the non-qualifying buildings or civil engineering works are not new or uncompleted, the transfer of the relevant land and property will be VAT free and it is not necessary for the transferor or transferee to opt to tax the land and buildings. Any VAT incurred on the transfer of the land and property will be recoverable,

More on VAT on transactions and reorganisations: