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It’s a transfer of a going concern (“TOGC”), but not as we know it

21 November 2012

Where a business sale is a TOGC for tax purposes, the transfer falls outside of the scope of VAT. No VAT is payable by the buyer and any SDLT is calculated on the VAT-exclusive purchase price.

HM Revenue and Customs’ (“HMRC”) view has historically been that the grant of a new lease could never be a TOGC, as it creates a new interest rather than transferring an existing interest. However, in Robinson Family Limited ([2012] UKFTT 360 (TC), TC02046) the Tax Tribunal disagreed and looked at the substance of the transaction over the form. HMRC has changed its policy as a result.

In certain (fairly limited) circumstances the grant of a new lease can now potentially be a TOGC if all other conditions are satisfied. Such transactions will therefore be the subject of much interest going forwards! It will also be interesting to see the extent to which historical VAT and SDLT refunds can be sought – further guidance is expected from HMRC soon.

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