V2.226 Business transferred as a going concern (TOGC)
The paragraph looks at the transfer of a business as a going concern (TOGC).
The disposition of a business as a going concern is a supply made in the course or furtherance of business. So is the disposition of the assets or liabilities of a business1.
This paragraph considers:
• the consequences of a transfer of a going concern
• the meaning of 'going concern'
• the conditions attached to the 'de-supply' of the transfer of a going concern
• TOGCs in particular circumstances – including property rental businesses and transfers into and out of VAT groups
For an overview of VAT and business more broadly, see V2.201B.
Whether a business is transferred as a going concern is important as it has several potential consequences for VAT purposes. The major consequences are set out below.
Where a TOGC fulfils certain conditions (ie those set out in SI 1995/1268, arts 5(1)–(3)) the supply of goodwill, premises, plant, stock, etc by the vendor is 'de-supplied'. As such, it is treated as neither a supply of goods nor a supply of services and is outside the scope of VAT. These de-supply conditions are examined further below.
This de-supply must be carefully considered by the transferee of a business. Since input tax credit is confined to the tax chargeable on a supply (see V3.421), it follows that any tax erroneously charged on such a supply does not give rise to input tax credit by the purchaser. For an example,